EUR Falls As ECB and Greece Weigh on Currency

The euro slid to a nine-year low against the dollar as investors predicted the European Central Bank (ECB) may act to stimulate the economy.

The euro fell by 1.2% against the dollar to $1.1864, marking its weakest level since March 2006, before recovering slightly to $1.19370.

The drop follows ECB president Mario Draghi’s comments indicating the bank could soon start quantitative easing.

Greek political turmoil also weighed on the currency.

Although the ECB has already cut interest rates to a record low level, and also bought some bonds issued by private companies, a full-scale programme of quantitative easing QE has not yet been launched.

But on Friday, Mr Draghi hinted in a newspaper interview that the bank might soon start a policy of QE by buying government bonds, thus copying its counterparts in the UK and US.

The purpose would be to inject cash into the banking system, stimulate the economy and push prices higher.

Speaking in an interview with the German newspaper Handelsblatt, Mr Draghi said: “We are making technical preparations to alter the size, pace and composition of our measures in early 2015.”

via BBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza