Before the European Central Bank gathered for this month’s policy meeting the Euro was trading close to an 11-week low against its North American counterpart.
The appeal of the Euro dimmed yesterday as the Eurozone’s retail sales report showed an unexpectedly steep decline in sales and the currency slipped further today as German factory orders dipped by 0.5 per cent rather than rising 0.2 per cent.
Prior to the ECB’s announcement senior currency strategist Yujiro Goto asserted; ‘The upside is limited for the Euro. Even if there’s no rate cut this time, the ECB will still have to reinforce its accommodative stance.’
However, the Euro went on to recover ground following the ECB’s neutral rate decision.
As forecast by economists, rates remained at record lows and fiscal policy was unaltered.
ECB President Mario Draghi intimated that officials were monitoring the situation closely and would take action in March if it appears that the Eurozone’s economy requires additional bolstering.
During his monthly press conference Draghi asserted; ‘The reason for today’s decision not to act has really to do with the complexity of the situation that I described and the need to get more information. We are willing, and we are ready to act. […] We remain firmly determined to maintain the high degree of monetary accommodation and to take further decisive action if required. We firmly reiterate our forward guidance. We continue to expect the key ECB interest rates to remain at present or lower levels.’
Draghi also stated that the Eurozone faces limited risks from upside and downside inflation pressures.
The Euro brushed a high of 1.36 against the US Dollar in the aftermath of Draghi’s comments.
The EUR/USD pairing was also affected by US data. While US initial jobless claims increased by less-than-forecast in the week ending February 1st, the world’s largest economy posted a wider-than-expected trade deficit.
Tomorrow the Euro could shed today’s gains if German trade balance data disappoints.
Given that German retail sales figures indicate an easing in domestic demand, December’s figures could see the surplus of the Eurozone’s largest economy narrow.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,British Pound,0.8343 ,
Euro,,New Zealand Dollar,1.6526,
Euro,,Canadian Dollar,1.4932 ,