The 17-nation euro traded slightly lower against the US dollar on the first day of the trading week, extending last week’s drop after the European Central Bank revealed its surprising decision to trim its interest rate to a new record-low.
A string of upbeat US macro releases dragged the euro to its lowest level in two month, dropping below the $1.3400 mark.
The euro traded flat, standing at $1.3366 against the US dollar as of 6:40am GMT, while the economic slowdown in the eurozone led the ECB to reduce its borrowing cost to a new record-low.
“While no follow up move is likely in December, ECB officials have been happy to flag that further action could be taken as needed, such as another LTRO, adjusting forward guidance or even a negative deposit rate. Data flow including euro zone Q3 GDP should encourage fresh bearish EUR positioning after IMM speculative accounts built a sizeable long stance from August to late October. Look to sell into any rallies to high 1.34s, with an obvious near term target the 200 daily moving average around 1.3215 but scope for further losses if US data keeps alive ‘taper’ hopes for a little longer,” analysts from Westpac Global Strategy Group wrote in a note on Monday.
Preliminary gross domestic product (GDP) reports from some of eurozone major economies are expected to be released later this week. The eurozone is expected to rise 0.1% in the third quarter. The economic output for the eurozone is forecasted to come in at 0.3% year-on-year in the third quarter.
The European Central Bank (ECB) revealed its surprising decision after its November meeting on Thursday, when it cut its main interest rate to a new all-time low.
The ECB trimmed its benchmark interest rate by 25 basis points to a new record low of 0.25%, analysts had expected the bank to keep its benchmark rate unchanged.
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