Euro wallows near lows, ECB Draghi speech awaited
The euro touched a fresh three-month low against the dollar on Monday as investors awaited comments from European Central Bank chief Mario Draghi and digested weekend elections in which critics of the European Union more than doubled their presence.
Liquidity was likely to be thin during the rest of the global session, with UK markets shut for the Spring bank holiday and U.S. markets closed for Memorial Day.
Eurosceptic nationalists scored stunning victories in European Parliament elections in France, Britain and Greece on Sunday, as voters registered discontent over immigration, austerity and unemployment.
Draghi is scheduled to address ECB Forum in Portugal, the first of what the central bank says will be an annual event equivalent comparable to the U.S. Federal Reserve’s annual Jackson Hole retreat.
“It is hard to think that Draghi will say anything new or surprising,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo, though his speech will be closely watched for any signals about the ECB’s next steps.
“But still, the ECB will matter most to the euro’s near-term direction than any longer-term potential impact from the elections,” he added.
The euro has fallen more than 2 percent on the greenback since May 5 against a backdrop of rising expectations that the ECB will ease policy next month, which in turn increased wagers on the common currency coming under pressure.
Commodity Futures Trading Commission published on Friday for the week ended May 20 showed speculators raised their net short positions in the euro to 9,220 contracts from 2,175 contracts the previous week.
The common currency last traded at $1.3619, down about 0.1 percent on the day. Early in the session, it briefly dipped to $1.3615, a low not seen since mid-February. In the near term, it is seen drifting between $1.3600, where large bids are said to have been placed, and its 200-day moving average at $1.3639.
Against its Japanese counterpart, the euro slipped about 0.2 percent to 138.80 yen.
Traders said the policy outlook will continue to be a negative factor for the euro rather than results of the weekend elections.
“The reality is that these results – in France especially – won’t mean a whole lot in practise but optically it’s an obvious pretext for some pressure on euro and sterling,” said Ray Attrill, strategist at National Australia Bank in Sydney.
In another key European election, billionaire Petro Poroshenko claimed Ukraine’s presidency on Sunday and vowed to end a conflict with pro-Russian rebels and align his country with Europe.
With the euro on the back foot, the dollar index held near a six-week peak of 80.443 set on Friday.
The Australian dollar was little changed at $0.9237, having formed a base just above 92 U.S. cents after a recent selloff that saw it fall from 94 cents.
Markets seemed to have come to the realisation that the Reserve Bank of Australia will keep interest rates at a record low 2.5 percent for the foreseeable future.
Against the yen, the greenback hit a fresh 1-1/2 week high of 102.05 early in the session, and was last up slightly at 101.92 yen.
The minutes of the Bank of Japan’s April 30 policy meeting released on Monday showed board member Takehiro Sato proposed changing the central bank’s assessment of prices to say that risks are tilted somewhat to the downside. That underscored scepticism within the BOJ board that Japan will be able to emerge from deflation in a year’s time.
On Saturday, BOJ Governor Haruhiko Kuroda repeated his view that the world’s third-largest economy is making steady progress toward meeting the central bank’s 2 percent price target.
He said the bank still has policy options left to ease monetary policy further to fend off risks that may threaten the achievement of its price target.