Currency Note Euro

Today’s ECB meeting may well undermine the euro

By Ricky Bean August 7th, 2014

Yesterday was a fairly bleak day for the Eurozone as Italy unexpectedly slipped back into recession and German factory orders dipped to far below what was forecast. As tensions in Ukraine remain and a consistent recovery in the eighteen-nation bloc remains elusive, the euro will continue to be under pressure.

Effects of yesterday’s poor data were relatively limited and there were no huge movements against sterling or the US dollar. However, sharper rate movements are likely to be seen today when the European Central Bank (ECB) releases its monthly interest rate decision and President Mario Draghi makes his address. As more aggressive monetary policy options have expressly been kept open by Draghi and economic data stubbornly fails to improve, any hints that the ECB will further loosen policy is likely to cause euro weakness. On the other hand, any expression of more positive sentiments may lend the single currency some support but this doesn’t seem likely given the poor Eurozone data mentioned above.