The euro declined against its major rivals in European deals on Monday, as traders await the European Central Bank’s meeting later this week, for any hints about stimulus measures amid persistent fears over deflation.
Inflationary outlook in the euro area turned worse after year-over-year price growth turned negative last month. This has raised the possibility of an expansion of its existing QE programme, which it aims to buy 1.1 trillion euros of bonds.
The ECB President Draghi has already reiterated that he is willing and ready to act if necessary, should the inflation outlook weaken further.
The diverging monetary policies of the ECB and the Federal Reserve also pressured the currency.
Friday’s data showing bigger-than-expected increase in U.S. consumer sentiment in October and upward revision to industrial production for August revived expectations for a Fed rate hike before the year end.
In economic news, data from Eurostat showed that Eurozone construction output decreased in August after rebounding in the previous month.
Construction output fell a seasonally adjusted 0.2 percent month-over-month in August, reversing a 0.4 percent increase in July, which was revised up from a 0.1 percent rise.
The euro was trading higher in Asian trading, as sentiment was underpinned after data showed that China’s third-quarter GDP figures beat forecasts.
In European trading, the euro fell to nearly a 4-week low of 0.7305 against the pound and a 10-day low of 1.1309 against the greenback, from early highs of 0.7372 and 1.1379, respectively. The next possible support for the euro is seen around 0.71 against the pound and 1.11 against the greenback.
The euro edged down to 135.07 against the yen, from an early high of 135.94. The euro is seen finding support around the 134.00 zone.
The single currency pared gains to 1.0818 against the Swiss franc, from an early session’s high of 1.0852, and held steady thereafter. If the euro continues slide, it may challenge support around the 1.075 mark.
The euro edged down to 1.5503 versus the aussie, 1.6597 against the kiwi and 1.4608 against the loonie, from early 4-day highs of 1.5707, 1.6771 and 1.4726, respectively. Further weakness may take the euro to support levels of around 1.52 against the aussie, 1.63 against the kiwi and 1.45 against the loonie.
Looking ahead, U.S. NAHB housing market index for October is set to be published in the New York session.
At 10:00 am ET, Federal Reserve Governor Lael Brainard will deliver a speech titled “Removing Unnecessary Regulatory Burden” at the Chicago Fed’s outreach meeting.
At 12:00 pm ET, Federal Reserve Bank of Richmond President Jeffrey Lacker will deliver a speech titled “Early Childhood Education in the Context of Lifetime Human Capital Investment” at the University of Richmond.
The Canadians are likely to vote for a new Parliament in the 42nd federal election due to be held today.
The material has been provided by InstaForex Company – www.instaforex.com