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Though most traders and analysts reckon the ECB will wait until
its December meeting to announce anything new, they see a risk
that additional easing measures could be flagged this Thursday
and are betting ECB chief Mario Draghi will at least try to talk
the currency down.
Many banks were expecting the euro to fall to parity with the
dollar <EUR=> by the end of this year as the ECB pumps 60
billion euros into the economy each month. But since dipping
below $1.05 in March, it has gained around 9 percent, adding to
the deflationary pressures facing the euro zone.
On Monday, the single currency fell a third of a percent to
$1.13085, its weakest since Oct. 9. Against sterling, it fell
0.6 percent to a 3-1/2-week low of 73.055 pence <EURGBP=D4>.
"There's not much in the way of news today...so all I can think
is that people are setting themselves up for a dovish ECB
meeting later in the week – that's really the big event on the
horizon," said RBC Capital Markets FX strategist Adam Cole in
London.
The Australian dollar was the biggest mover among major
currencies, strengthening half a percent against its U.S.
counterpart <AUD=> to $0.7300 after GDP data from China which,
though showing growth falling below 7 percent for the first time
since 2009, was slightly better than had been expected.
"We don't really think that rally is going to last," said Sam
Lynton-Brown, a currency strategist at BNP Paribas in London.
"Generally risk assets have performed in an environment of the
Fed delaying tightening ... but the reason why the Fed is likely
to be on hold is due to concerns about external factors."
After the ECB meeting, currency traders' focus will turn to the
U.S. Federal Reserve, which holds its policy meeting next week.
Most expect the Fed to keep interest rates at their record lows,
while investors are split over whether "lift-off" will come at
December's meeting or in 2016.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by
Hugh Lawson)
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