Euro Weakens on Stimulus Bets, Economy as Oil Declines
Frankfurt (May 15) The euro weakened to the lowest level in more than two months against the dollar as speculation mounted that policy makers will pursue more stimulus and a report showed the region’s economy grew less than forecast. Oil fell with nickel while European stocks were little changed.
Europe’s shared currency declined 0.4 percent to $1.3659 at 7:29 a.m. in New York. French borrowing costs fell to an all-time low at an auction of five-year notes. The Stoxx Europe 600 Index swung between gains and losses while Standard & Poor’s 500 Index futures slipped less than 0.1 percent. Wal-Mart Stores Inc. dropped in early trading after its earnings outlook trailed estimates. Turkey’s lira declined as labor unions went on strike after the nation’s worst mining disaster. Oil fell 0.4 percent and nickel slid 6.2 percent.
Euro-area policy makers are prepared to add more monetary stimulus if needed, European Central Bank Vice President Vitor Constancio said in Berlin. The region’s economy grew 0.2 percent, compared with 0.4 percent estimated in a Bloomberg survey, as France unexpectedly stalled and economies from Italy to the Netherlands shrank. U.S. reports on inflation, factory output and the job market are due today and Federal Reserve Chair Janet Yellen will speak after saying last week the U.S. economy still needs support.
“Since last week there’s been a number of comments suggesting the ECB are open to more easing measures if need be,” said Kiran Kowshik, a currency strategist at BNP Paribas SA in London. “Markets were surprised by how dovish Draghi was. The euro is getting hit because investor positioning has been largely neutral in recent months and is catching up.”
The euro fell to as low as $1.3660, the weakest level since Feb. 27. The shared currency dropped 0.4 percent to 139.20 yen and reached 139.11, also the least since Feb. 27. The yen was little changed at 101.85 per dollar.
CPI Forecast
ECB policy makers have “reaffirmed our forward guidance and stressed that we are determined to act swiftly if required and do not rule out further monetary policy easing,” Constancio said.
Professional forecasters revised down their estimates for euro-area inflation in a report released today by the ECB.
France sold 4.54 billion euros ($6.2 billion) of 2019 notes at a yield of 0.68 percent.
Treasury 10-year note yields were little changed at 2.54 percent after touching a six-month low of 2.52 percent yesterday.
The average yield to maturity on bonds in Bank of America Merrill Lynch’s Global Broad Market Sovereign Plus Index fell to 1.58 percent yesterday, the lowest since June 18. The rate on euro-area securities fell to a record-low 1.47 percent.
Trading Volumes
Almost two shares fell for every one that gained in the Stoxx 600, with trading volumes 24 percent higher than the 30-day average, according to data compiled by Bloomberg. The gauge has gained 0.8 percent this week, heading for its fifth weekly advance, and is up 4 percent this year.
