The Euro slumped to its lowest-level in more than three-months against the US Dollar on Wednesday as investors look ahead to next week’s eagerly anticipated European Central Bank policy meeting.
Pressure is building on the single currency as expectations mount that the ECB will introduce new easing measures at the meeting due to be held on June 5th.
Since ECB President Mario Draghi hinted that the Bank’s policy makers would be comfortable with introducing measures to tackle the threat of low inflation, the Euro has weakened broadly against the majority of its peers and has declined by more than 2% against the US Dollar.
Yesterday Mr Draghi said that the bank was aware of the risks of low inflation and was prepared to take action to get inflation in the Eurozone back on target.
The market was further spooked by his comments which suggested that the region was experiencing the beginnings of a deflationary cycle.
Data released earlier in the session also weighed as unemployment in Germany increased unexpectedly in May by its largest amount in five years.
A separate report released by the ECB showed that bank lending in the Eurozone shrank by 1.8% in April from the previous month, the 24th consecutive month of declines.
“There was a significant downside surprise in the lending numbers. This will be a source of concern for the ECB in addition to the contraction in credit growth. It adds to the case for ECB easing and is consistent with a Euro-bearish theme,” said a senior global-currency strategist at BNP Paribas SA.
Concerns over the upcoming ECB policy meeting increased demand for the safe haven US Dollar.
The US currency was able to make gains despite the day’s data releases coming in below expectations.
Mortgage approvals missed expectations and the latest Retail Store Sales Index fell to 1.2%.
The US Dollar is likely to make further gains tomorrow due to a lack of market moving Euro data and the publication of the latest US GDP growth figures.
Euro Exchange Rate News:
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