WASHINGTON: The euro moved higher against the dollar on Tuesday (Jan 19), two days before the European Central Bank meets to review the struggling European economy.
“The ECB isn’t expected to make any changes this time,” said Joe Manimbo, a market analyst at Western Union Business Solutions.
“But it could signal a wide-open door to easier action given oil’s massive plunge from above US$40 when the bank last met in early December to below US$30, a move the puts downward pressure on already feeble inflation.”
The pound fell to a nearly seven-year low against the dollar, hitting US$1.4166, after Bank of England governor Mark Carney said it was too early to lift Britain’s record-low interest rate. Carney cited weak global growth and low inflation for maintaining the status quo.
“This is clearly a dovish speech by the governor and it can only fuel belief that the Bank of England will not be raising interest rates before late 2016 and could delay acting until 2017,” said Howard Archer at IHS Global Insight.
The Canadian dollar continued to fall against the greenback as well, hitting CAN$1.4587 per US dollar. Kathy Lien said that poses a challenge to the Bank of Canada as it meets on Wednesday.
“Based on oil trends and recent economic reports, we believe the economy needs a 25 basis point rate cut,” she said. “However, the Canadian dollar is falling too far too fast and that could deter the central bank from lowering rates and risking an even deeper slide in the currency.”
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