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Euro heads higher ahead of ECB meeting

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(Globalpost/GlobalPost)

The euro moved higher against the dollar for the fourth straight session Wednesday ahead of the policy meeting of the European Central Bank, widely expected to result in an interest rate cut.

Poor data on the manufacturing sector and job creation in the United States, coupled with a tepid view of the economy from the Federal Reserve, also put downward pressure on the greenback.

At 2100 GMT the euro was at $1.3180, compared to $1.3165 late Tuesday. During the day the currency hit a nine-week high of $1.3243.

ECB policy makers were to meet in the Slovakian capital of Bratislava on Thursday amid widespread speculation that they could cut interest rates from current record lows and also unveil new measures to kick-start stymied bank lending.

There were doubts about how much the ECB could do to help pull the eurozone out of recession, but a rate cut could demonstrate positively that they are trying, analysts said.

"The latest deterioration of sentiment indicators has clearly increased the chances for more ECB action this week. Indeed, the majority of financial market participants even seem to be expecting a rate cut," said ING-DiBa economist Carsten Brzeski.

"Analysts are also hoping to see the ECB discuss non-standard measures, notably to help lift banking lending in the region's struggling periphery," said Markit chief economist Chris Williamson.

Meanwhile the Federal Reserve, closing out a two-day monetary policy meeting Wednesday, made no changes to its ultra-low interest rate and quantitative easing stimulus efforts.

But it appeared to acknowledge recent weakness in the economy, noting for the first time in its policy statements that it had the option of adding to its QE bond buying if economic conditions deteriorated.

The yen was little changed: the dollar slipped to 97.40 yen from 97.45 Tuesday, while the euro edged higher to 128.37 yen from 128.31 yen.

The British pound gained on the dollar, rising to $1.5556 from $1.5534. The dollar fell against the Swiss currency, to 0.9271 franc from 0.9294.

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http://www.globalpost.com/dispatch/news/afp/130501/euro-heads-higher-ahead-ecb-meeting