Euro recovers on bets the ECB will not cut interest rates

Published: 7 Nov at 12 PM Tags: Euro, Dollar,

Expectations that the European Central Bank will not announce a cut in interest rates have helped the euro to remain firm today. However, if governor Mario Draghi does announce a change in the central bank’s policy, any gains are likely to be short-lived. Last week a drop in inflation in the eurozone caused many experts to predict a cut in the ECB’s refinancing rate.

The euro rose 0.1 per cent to $1.3523. The euro has also been given a boost by an increase in industry orders in Germany, the eurozone’s largest economy. Before the weaker than expected inflation data released last week the single currency had managed to trade as high as $1.38.

Morgan Stanley said it expected the euro to drop below $1.30 before the end of this year. If Draghi hints that negative deposit rates will be introduced in December, the euro will come under pressure. Analysts are also looking at October’s job report from the US, due to be released on Friday.

If the data is strong the dollar is likely to make gains against its European counterpart. The dollar index is currently holding firm at 80.487. On Monday the index hit a seven-week peak of 80.93.

Elsewhere the Australian dollar has been hit by weak job figures and dropped to $0.9487, a 0.35 per cent loss.