Stock Market Watch

Forex Market Update: Euro Eases against the U.S. Dollar

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The euro fell against the U.S. dollar on Tuesday as expectations over further monetary easing from the European Central Bank (ECB) increased after economic data releases from the monetary union showed that the region’s economy continues to struggle.

Nevertheless, currency strategists are expecting dollar gains vis-à-vis the common currency to remain capped as speculation is rife that the Federal Reserve, which will kick-start its two-day policy rate meeting on Tuesday, might continue with its ongoing quantitative easing or QE3 (monthly $85 billion worth bond purchase program), following the release of disappointing first-quarter GDP data on Friday.

At last check, the euro fell 0.17% to trade at $1.3077.

“I’d be very surprised if they (the European Central Bank) didn’t cut rates. I don’t know how bad it has to get before they actually take action,” said Richard Driver, a currency market analyst for Caxton FX, according to Reuters.

Earlier today, a data release showed that annual inflation in the euro zone fell to 1.2% in April, which is lowest level since February 2010 while the region’s unemployment rate climbed to 12.1% in March.

It is believed that the ECB will slash its benchmark interest rate by another 25 basis points to 0.50%. The ECB is scheduled to announce its policy rate statement on Thursday. However, some market analysts argue that in case the central bank cuts prime lending rates, there would not be any drastic impact on the euro since market participants have already factored in possible rate cuts.

 

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edliston
Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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