The Eurozone wallowed close to a 10-week trough versus the U.S. Dollar after the release of disappointing inflation data in the Eurozone ignited investor speculation that the central bank might this week decide to provide additional quantitative easing in order to prevent a further slide into deflationary territory. The emerging markets selloff of last week is still clearly a concern for FX players as they keep their distance from higher risk assets and are instead propping up safe haven currencies like the Japanese Yen.
As reported at 10:23 a.m. (JST) in Tokyo, the EUR/USD pair traded at $1.3489 during Monday’s early trade in Asian, staying within striking distance of last Friday’s trough at $1.3479, a level not seen in last November. The EUR/JPY traded at 137.37 Yen before edging higher to 137.54 Yen but currency strategists believe it is in a good bearish position to soon move below the pair’s 100-day moving average.
European Central Bank in Focus
The European Central Bank will meet later this week to decide monetary policy, and the CPI data, coming in at 0.7% in January on a year-over-year basis rather than 0.9% expected by analysts, has lead market players to believe that Mario Draghi may now feel that deflation is a threat and thus offer an interest rate cut as a means of easing.