Euro declines as traders expect central bank action

Posted On: January 02, 2015

The euro fell 0.6 percent Friday to 1.2034 per U.S. dollar, Bloomberg reported. The decline marked the currency's lowest rate in more than four years.

Mario Draghi, president of the European Central Bank, indicated that the bank will likely begin purchasing large-scale government bonds, the publication noted. Investors believe that quantitative easing will begin as soon as the first quarter of 2015. Meanwhile, the yield on 10-year Spanish government debt declined 7 basis points to 1.54 percent.

"Traditional hawks who had wanted to stick to standard monetary policy instruments in the wake of the worst financial crisis in 80 years have been proven wrong and wrong again," Holger Schmieding, chief economist at Berenberg Bank in London, told Bloomberg. "Instead of inflation and moral hazard as the feared result of some non-standard policies, the euro zone is getting even closer to deflation."

The euro zone is projected to report next week that consumer prices declined 0.1 percent in December after increasing 0.3 percent in November, according to Reuters. The central bank's goal is just below 2 percent.

When Draghi spoke with Handelsblatt, a German financial newspaper, he said that the bank is less likely to uphold price stability compared to six months ago.

Category: Industry News

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