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Euro Falls to 11-Year Low as ECB Prepares QE

Posted by Joseph Trevisani on Mar 4, 2015 1:36:00 PM

The euro sank to levels not seen against the U.S. Dollar in more than a decade as the eurozone and American economies seemed to be heading in opposite directions and markets wait for the European Central Bank to reveal the details of its sovereign debt purchase plan on Thursday.

The united currency dropped as low as 1.1062 in New York trading, its fifth decline in a row and the weakest it has been since September 2003.  

Mario Draghi the President of the ECB is expected to discuss the mechanisms that the central bank will use to purchase European national debt in an effort to head off deflation and stimulate the euro zone economies in the news conference after the ECB board meets on Thursday.  Mr. Draghi announced the plan at the last ECB meeting but so far has provided few specifics as to how the purchases would operate.

Prices in the EMU fell 0.3 percent in February from a year earlier, the third month of falling expenses in a row.  The February purchasing managers’ indexes in manufacturing and services from Markit Economics were lower, though the unemployment rate improved 0.1 percent to 11.2 percent, the second 0.1 percent gain in a row. 

Inflation in the United States remains positive though well below the Federal Reserve's 2 percent target and, according to the Fed's 'Beige Book' summary, the economy is expanding moderately. The core PCE deflator rose 1.3 percent on the year ending in in January. 

The Dollar Index climbed as high as 96.059 today, the highest it has been since September 2003. The trade weighted 'broad index' was trading at 114.6886 in mid-afternoon in New York, down from its recent 114.8980 high, but well above its 101.6557 average of the past three years.  

American economic results are being watched by traders and Fed governors as the central bank considers raising the Fed Funds rate for the first time in eight years. The June FOMC meeting is thought to be the earliest that the governors could act, though they have stressed time and again that their decision is dependent on the economic data.

The January statement from the FOMC seemed to pull back a bit from the June inaugural increase, noting that the economy had slowed somewhat, a sentiment reinforced by today's Beige Book. 

 Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

eur march 4



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