By Tommy Stubbington
The euro nudged down to a fresh two-year low against the dollar
Thursday ahead of the European Central Bank's monthly meeting, with
expectations of further easing running high.
The ECB is widely expected to leave interest rates on hold, but
a growing number of investors and analysts expect the bank's head
Mario Draghi to indicate that officials are moving closer to
launching a wide-ranging program of asset purchases, known as
quantitative easing.
The common currency fell 0.1% early in the European session to
$1.2296, its weakest level since August 2012.
Yields on government bonds in the eurozone have hit all-time
lows this week as expectations of further monetary easing build.
Those expectations had intensified on Wednesday following the
release of a batch of disappointing eurozone business activity
data.
In equity markets, the Stoxx Europe 600 edged 0.1% higher in
early trade, closing in on its highest level since the financial
crisis.
"For the majority of market participants it is likely to be
obvious now that at some stage sooner or later the ECB will
implement further expansionary measures. Economic recovery at a
snail's pace, low and falling inflation and long term inflation
expectations dropping like a stone: the evidence is overwhelming,"
said Commerzbank currency strategist Thu Lan Nguyen.
Investors are betting that a QE program will continue to buoy
bonds and stocks in the euro area, but many think the ECB will wait
until next year before broadening its stimulus efforts.
"In general, risk assets have done well on the back of QE
programs that have previously been rolled out, thus we would expect
a similar move in European risk assets. But the market may be
getting ahead of itself somewhat, so we may see a modest pull-back
in price in coming weeks if [there is] any hint in delay of
implementation," said Wayne Bowers, head of asset management for
Europe and Asia at Northern Trust, which manages $923 billion of
assets.
Markets in Europe were also given a positive lead by the U.S.,
where the S&P 500 closed at a record high Wednesday.
In commodities markets, Brent crude oil was 0.3% higher at
$70.10 a barrel, while gold was down 0.3% at $1,205.00 an
ounce.
Write to Tommy Stubbington at tommy.stubbington@wsj.com