Euro elbowed near two-month low as market braces for a dovish ECB

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Euro elbowed near two-month low as market braces for a dovish ECB

On Thursday, the 25th of July 2019, the euro zone currency has been trading near its two-month low against American dollar at $1.1138 ahead of a high-stake ECB meeting, as stock and currency markets had been bracing for further policy easing amid a faltering euro zone growth.

Besides, the single currency had been on its course to post a plunge for five straight sessions, while it had already dipped 0.74 percent this week so far after digesting a dwindling of 0.54 percent last week. In point of fact, investors’ sentiment towards the euro zone currency had took a sharp downturn on Wednesday (July 24th) following reveal of a bundle of disdainful economic data displaying that the euro zone’s largest economy, Germany’s manufacturing sector PMI (Purchasing Managers’ Index) had contracted at its fastest pace in seven years last month, while France’s business growth was slowed down unexpectedly in June, which eventually had jolted European bond yields.

Aside from that, emerging market currencies were lowered against American dollar on Thursday (July 25th) after North Korea had fired two short range missiles, ratcheting up tensions in such an Asian triangle where tensions were already running high amid trade disputes between South Korea and Japan, while risk appetites seemed to have diminished ahead of a likely ECB policy easing and US Central bank’s first interest rate cut since 2015.

Citing prospects of further downside risks for euro, which has now been trading below its critical support level on a 200-day moving average, general manager of fixed income business solution at SBI Securities in Tokyo, Tsutomu Soma said, “I see more downside for the euro, because there are no good signs coming from Europe at the moment.

Don’t expect European bond yields to rise anytime soon. The U.S. is headed toward lower rates, which used to be a supportive factor for the euro, but that is no longer the case”. Euro shrugged off more than 2 percent his month over speculation that ECB could ease policy further to grapple with a likely EU-US tariff abrasion amid an escalated Sino-US trade spat.