Euro Directs For Worst Week as ECB Keeps Wary Stand

On Friday, the euro was directed for its worst weekly loss in 19 months. This is because of European Central Bank’s keeping of record lows on interest rates into next year.

The ECB confirmed the termination of its massive bond purchase scheme at the end of the year. This is one of its moving steps into dismantling crisis-era stimulus.

Following the announcement, the euro climbed into a $1.1853 high in one month.

Euro bulls, however, recoiled on ECB’s announcement on keeping its interest rates steady into next year. This reflects the uncertainties surfacing on the economy of the eurozone.

Euro made a 1.9% fall on Thursday which was the largest decline since the vote shock of Brexit.

On the week, the currency went to a 1.7% decline which is the worst weekly defeat since November 2016.

Senior Forex Strategist Junichi Ishikawa of Tokyo’s IG Securities said that the euro showed a big reaction on ECB meeting.

“As its [ECB Meeting] stance came in sharp contrast to the Federal Reserve, which had struck a hawkish tone just the day before,” Ishikawa said.

On Wednesday, the Fed made its second hike on interest rates this year. Moreover, it specified that this could stiffen two times the policy.

“Instead of reacting immediately to the Fed, many in the market had opted to first see out the ECB meeting, considered the main event of the week. And they duly reacted,” Ishikawa said.

After a 1.7% drop overnight, the euro made a 127.900 low on the yen. Meanwhile, the greenback had a short change of 110.620 on yen after escalating the previous day.

Against yen, dollar made a 1% increase on the week. Amid this, the greenback reaches a three-week reach of 110.850 high on Fed’s policy announcement.

Euro advances ahead ECB meeting

On Thursday, the euro advanced on an above $1.18 despite the emerging expectations on European Central Bank’s meeting. Right after its policy meeting, ECB is planning to signal the termination of its vast stimulus programme.

Removing short gains, the greenback went lower after a slight aggressive statement of the U.S. Federal Reserve on Wednesday.

Analysts said that the pricing of Fed hiked interest and future rates are on a growing view. This view is about US economic strength’s probability in reaching closely its peak.

Investors are keeping their eyes on ECB’s beginning of its tightening policy. This will terminate its huge asset purchases at the end of the year.