Euro hits low point after European Central Bank meeting

David Hobart

The fallout from a meeting of the European Central Bank intensified problems for the euro on Thursday and into Friday.

The currency was down in its pair against the US dollar and was seen at $1.1049 at one stage.

Against the British pound, it was down to its worst performance in five weeks.

It also reached historic lows against the Swiss franc, which is known for being a safe haven currency which investors flock to during times of trouble.

The single currency was at a 33-month low in this pair.

The problem came in part from the surprisingly dovish approach taken by the European Central Bank when it met on Thursday.

The Bank’s president, Christine Lagarde, said on Thursday at a press conference following the meeting that the eurozone’s growth risks were still downside-oriented – a statement which many traders interpreted as sign of potential interest rate cuts.

However, part of the decline came from nerves around the release of various purchasing managers’ indices (PMIs) on Friday.

The German figures were expected out, as were figures for across the whole of the Eurozone.

Elsewhere around the world, the Australian dollar continued to nurse its losses following damage inflicted on it by fears over China’s economic growth.

The Australian currency tends to depend in large part on the performance of the Chinese economy, and the recent outbreak of a serious virus in China has led to worries over whether or not the Aussie will be able to hold firm.

The currency was seen at $0.6843, which saw it wipe out some progress made thanks to a positive enough labour market report on Wednesday.

It now appears that the currency is doomed to see four weeks in a row of drops in value.

The currency may also see limited trading volumes in the coming days given the Australia Day holiday, which is observed over the weekend.

The US dollar index – a mechanism for assessing how the greenback is performing compared to several others around the world, including the euro – remained firm.

It was seen hovering at 97.717 and was expected to go up for the third week in a row.

Looking ahead to next week, Monday is set to be a quiet day.The only major European event on the horizon will be the IFO business climate release for January, covering Germany.

This is due out at 9am GMT and is set to show a change from 96.3 to 97.

There’ll also be a new home sales release out of the US at 3pm GMT covering December.

Month on month, this is expected to show a change from 719,000 to 725,000.

On Tuesday, the big event will be the release of the nondefense capital goods orders (excluding aircraft) metric from the US Census Bureau.

This is due at 1:30pm GMT and is expected to reveal a rise from 0.1% to 0.2%.

Later in the day, there will be a consumer confidence release out of the US.

This is scheduled to happen at 3pm GMT.

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David Hobart
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