By: Barbara Zigah
Ahead of the European Central Bank’s policy and rate setting meeting which is set to begin later in the global day, the common currency fell from multi-month peaks against the Japanese Yen and the U.S. Dollar. The ECB has strongly hinted that an interest rate increase would be forthcoming, but now investors are pondering exactly how much of one might be under consideration. Most analysts expect an increase of 25 basis points for this, the first ECB rate hike in nearly three years. There is some speculation that by November the rate could be as much as 100 basis points higher, which the market already appears to be pricing in.
While the interest rate hike is not yet a done deal, many economists are suggesting that given the fiscal state of several of the Eurozone nations, i.e. Portugal, Spain, Greece, etc., an interest rate hike will be more harmful than good.
As reported at 2:57 p.m. (JST) in Tokyo, the Euro slipped against the U.S. Dollar, trading at $1.4297 following yesterday’s surge to $1.4350. Near term support is pegged around $1.4285 to $1.4250; some currency strategists say that if the Euro can’t rise well above $1.4282, it could retreat to near $1.4160. Against the Yen, the Euro was trading at121.77 Yen following yesterday’s 11-month peak. Most analysts agree that the long-term outlook for the Yen is on a downtrend.