November 26, 2024

Euro broadly flat ahead of ECB meeting

The euro was broadly flat on Thursday after preliminary euro zone economic growth data was even more dire than expected. Investors looked ahead to the ECB meeting.

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The euro was broadly flat on Thursday after preliminary euro zone economic growth data was even more dire than expected. Investors looked ahead to the ECB meeting.

A preliminary flash estimate of euro zone gross domestic product showed that Europe’s economy contracted by 3.8%. The decline in the first three months of the year was the sharpest quarterly decline since the time series started in 1995.

The market focus was also on the ECB, which is printing cash at a record rate as the coronavirus pandemic sees European countries’ debt surge.

The ECB is under pressure to ramp up its response to the virus. There are some expectations that euro zone policymakers will expand debt purchases to include junk bonds. Also, the markets expect that ECB will take other steps to ease conditions in credit markets.

The ECB held back on big policy moves despite mounting evidence of the damage being wrought on the euro zone economy by the coronavirus crisis. ECB stressed that it would pay even more for banks to borrow from it as it prepared for a long fight.

Finance ministers from the G7 countries on Thursday discussed strategies to accelerate economies once they reopen.  

U.S. consumer spending tumbled 7.5% last month after rising 0.2% in February, by the most on record in March on the back of stay-at-home orders.

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Forex – Euro broadly flat ahead of ECB meeting

More countries are taking steps to re-open their economies as coronavirus infections slow, giving some cause for optimism.

The dollar fell overnight after the U.S. Federal Reserve left the door open to more monetary easing. Positive trial results for a drug to treat COVID-19 also boosted risk appetite. Against a basket of currencies, the dollar touched a two-week low.

The dollarcame close to six-week lows versus the yen in early London trading, before starting to recover, last at 106.64.

The euro was broadly flat during early trading. The common currency was last up 0.18% at $1.0883, the highest since April 16, after dropping to $1.0834 after the ECB meeting.

The riskier Australian and New Zealand dollars, which have risen every day for the past week, reversed their gains and dipped on Thursday morning.

The Swiss franc rose to a weekly high against the dollar, and was last at 0.97115, up around 0.3% on the day.

The pound surged on Thursday as investor risk appetite improved. Sterling was last up 1.1% at $1.2605. It also rose 0.4% versus the euro to 86.90 pence.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money