Fed’s Decision Sends Euro Lower

By: Barbara Zigah

Following the announcement by the U.S. Federal Reserve Bank that they would leave their monetary policy unchanged, the Euro sank against the greenback, and stayed close to an 11-month low. Market players will return their focus to today’s auction of Italian debt, and many expect that the common currency could decline even further. As reported 11:50 a.m. (JST) in Tokyo, the Euro was trading at $1.3030, retreating from the overnight low of $1.3009. Analysts see $1.3000 and $1.2980 as the next key levels, but believe a break lower than latter could lead the way to a significant drop.

Markets are waiting to pass sentence on the Eurozone’s leadership as they consider the latest events surrounding the proposed ESM, the European Stability Mechanism. According to one media report, the German government will reject the proposal to raise the existing €500 billion lending limit on the mechanism; the adequacy of the ESM will be reviewed in March but many expect that it will fall short of meeting the potential needs of some of the larger financially troubled Eurozone members. One forex researcher in Paris said that every pronouncement of what the Eurozone’s policy makers aren’t willing to risk for a deleveraged Eurozone financial system edges up markets’ skepticism.