MW: Euro falls after Draghi tells European Parliament more stimulus is likely
The euro edged higher Wednesday as European Central Bank President Mario Draghi told members of the European Parliament that the central bank stands ready to expand its program of quantitative easing.
The euro EURUSD, +0.2336% was recently trading at $1.1160, up 0.3% from $1.1130 late Tuesday in New York, according to FactSet data.
Typically, any indication that more stimulus is likely would cause a currency to weaken because central-bank asset purchases pump more money into the economy, market strategists say.
But, currency strategists said, the euro moved higher because investors were expecting Draghi to commit more firmly to action in the near future. He largely reiterated remarks made during the September meeting of the ECB’s governing council.
“I think he wasn’t quite as dovish as people were expecting,” said Colin Cieszynski, chief markets strategist at CMC Markets. “People thought he would come out and say ‘we’re going to bring new stimulus asap’ but he didn’t really say that. He kept his options open.”
Draghi wasn’t the only ECB member who spoke publicly Wednesday. Ewald Nowotny, a member of the ECB’s governing council, earlier said he’d like the central bank to wait before deciding on additional stimulus measures. The euro first began rising after Nowotny’s comments.
Official data released Wednesday morning Beijing time showed China’s manufacturing sector had its worst month since the global financial crisis. The data weighed on commodity-linked currencies like the Australian dollar AUDUSD, -1.1567% and Brazilian real .
The real USDBRL, +1.9115% was trading at another all-time low of 4.12 to the dollar after breaking below the key level of four real to the dollar on Tuesday.
Strategists say the data could also have negative implications for the U.S. dollar.
“It is hard to see the greenback gain much further ground in such an environment when anything that suggests China is slowing more rapidly is likely to delay the Fed’s decision even further,” said Angus Campbell, senior analyst at FxPro.
The China data weighed on stocks across the globe, with Asian shares sliding and U.S. stocks trading largely flat.
The ICE U.S. Dollar index DXY, +0.14% , a measure of the dollar’s strength against a basket of currencies, was flat at 96.2320.
