Forex Market Update: Euro Edges Lower Ahead of ECB Meeting

The euro edged lower against the U.S. dollar on Wednesday as traders remained cautious ahead of European Central Bank’s (ECB) monetary policy meeting, which is scheduled for Thursday. The dollar edged higher against the Japanese yen on Wednesday, hitting a one-week high, following better than expected ADP jobs report.

Last week, some weak euro zone economic data and rising borrowing costs in Italy following an inconclusive election fueled speculation that the ECB will cut euro zone’s benchmark interest rates as early as this week. The euro had slipped to lowest level against the dollar in 2013 last week. However, the single currency recovered earlier this week as better than expected euro zone economic data convinced traders that the ECB will keep interest rates unchanged at Thursday’s meeting.

Still many analysts believe that the ECB will cut rates in the coming months, given the weakness in the euro zone economy. This is likely to keep the euro under pressure.

Speaking to Reuters, Neal Gilbert, Market Strategist at GFT, said that while lowering rates may be feasible, the ECB is not likely to take this step without giving some sort of red flag to the market at least one meeting beforehand to indicate that it may do so. Gilbert believes that Thursday’s meeting is where the flag will be waved.

At last check on Wednesday, the euro was down 0.5% to $1.2993.

The dollar, meanwhile, also edged higher against the Japanese yen as traders digested better than expected data from the labor market. A report released by ADP showed that the private sector in the U.S. added 198,000 jobs in February, well above economists’ forecast.

The greenback rose to a one-week high of 94.11 against the yen on Wednesday. At last check, it was trading 0.9% higher at 94.10 yen.

The dollar index was last trading 0.5% higher at 82.486.

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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.