Euro falls again ahead of European Central Bank meeting

Emma Haslett
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Markets have been eager for more clarity on the ECB's much-anticipated quantitative easing programme (Source: Getty)

The euro fell to a fresh 11-year low against the dollar as markets awaited the outcome of a meeting by the European Central Bank (ECB) in Cyprus which will, they hope, give more clarity on bank boss Mario Draghi's plans for a €60bn-a-month quantitative easing programme.

The currency dipped 0.3 per cent to $1.1045 this morning as traders worried Draghi would fail to shed any light on the bond-buying programme. Indeed, some have suggested a lack of supply of sovereign bonds could scupper his chances.

Still, European markets showed their optimism. Germany's Dax was up 0.57 per cent in early trading, while France's Cac rose 0.52 per cent. The FTSE 100, on the other hand, showed a more modest rise of 0.16 per cent.

Investors are hoping Draghi will answer questions about when the programme, which was announced back in January, will actually begin.

However, analyst Kit Juckes, of Societe Generale, said he expected "few fireworks".

"Re-affirmation of the commitment to buy €60bn per month, some clarity on logistics (how the issue and issuer limits will be operated, etc) will be important to the bond market, which has gone a long way since the original announcement. Any sign of discord (from the Bundesbank?) or any watering-down of the plan, would be noteworthy too."

Others suggested that although the euro has edged closer to the psychological $1.10 barrier in recent weeks, a lack of clarity from Draghi could serve to push the euro higher.

"The absence of anything new in the policy announcement may highlight a lack of fresh fodder to fuel near-term selling pressure," suggested Ilya Spivak, a currency strategist at DailyFX.
"The euro has been falling alongside front-end bond yields since early May 2014 as trades priced in on-coming easing, putting speculative net-short positioning near the highest on record. In the meantime, the threat of imminent 'Grexit' came and went.
"If investors don’t find another reason to build short positions, they may just begin to take profits on existing anti-EUR bets and send the single currency higher."

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