The Euro held onto recently earned gains during the Asian trading session but as speculation that the European Central Bank might lower interest rates later this week, analysts expect that Euro demand will wane. The common currency did get a brief lift from data which showed an acceleration in manufacturing activity last month, with new orders rising for the fourth consecutive month. However, last week’s inflation data still has investors concerned that the ECB will now feel the need to address the looming issue of a possible deflationary trend head on.
As reported at 11:18 a.m. (JST) in Tokyo, the EUR/USD was trading higher and moving away from a recently struck 7-week trough and was last seen at $1.3510, still well off last month’s 2-year high of $1.3833. The EUR/JPY pair traded higher at 133.26 Yen, edging away from Friday’s 3-week trough. The rise in the Euro also helped to push the U.S. Dollar Index lower which was trading at 80.591 .DXY, slipping from a recently hit 7-week high.
Outlook to ECB Meeting
A consensus of analysts recently polled believes that the central bank will likely leave monetary policy unchanged this month. However, in the press conference which follows they believe that ECB head Mario Draghi is likely to bring up the possibility of a future 25 basis points rate cut, possibly to occur as soon as next month.