The euro dipped slightly against the dollar as currency markets headed into an eventful week.
The common currency traded at $1.3841 as investors looked ahead to inflation data from the eurozone and the Federal Reserve’s upcoming policy meeting later this week.
At its two day policy meeting beginning on April 29, the Fed is expected to stay the course and continue cutting down its bond-buying stimulus. The focus will be on the bank’s forward guidance for the remainder of 2014 and whether or not the bank is planning to raise its key interest rate any time soon.
At last month’s meeting, Fed Chief Janet Yellen confused investors by throwing out six months as an estimate for how soon the bank would raise interest rates after it had finished tapering.
In the eurozone, inflation data will be the highlight of the week as the region’s consistently soft figures have put some pressure on the European Central Bank to ease further. Last month’s figures were dangerously close to zero, at 0.5 percent, but the bank elected to wait on stimulus measures despite calls from eurozone policy makers and the International Monetary Fund for easing.
Ahead of the ECB’s policy meeting next week, bank President Mario Draghi and his colleagues have been talking endlessly about the possibility of easing to combat falling inflation and the common currency’s strength.
However, Reuters reported that Jose Manuel Gonzalez-Paramo, an executive board member at Spain’s BBVA, said the uncertainty about ECB policy is detrimental to the region’s recovering banks.
One of the biggest question marks is whether or not the ECB would decide to print money for a quantitative easing program. With the results of banking stress tests due out by October, eurozone banks have been trying to firm up their balance sheets and boost their reserves, but with the ECB’s plans unknown, many are worried about the effect of further easing on the banks.
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