Euro weakens as eyes turn to ECB meeting

Thu Nov 8, 2012 5:39am EST
 

By Richard Hubbard

LONDON (Reuters) - The euro fell to a two-month low on Thursday despite approval of a crucial austerity package by Greece, with investors focused on a European Central Bank policy meeting later in the day.

The ECB is widely expected to leave interest rates on hold, but comments by President Mario Draghi on the weak economic outlook and gloomy European Commission forecasts have raised speculation it might just cut its main rate from 0.75 percent.

"If you wander around the trading floors they are flirting with the idea we could get a cut from the ECB today," said Daragh Maher, director of FX strategy at HSBC.

The common currency was down 0.1 percent at $1.2765, not far from Wednesday's two-month low of $1.2736.

The euro was under pressure even though the Greek parliament approved in the early hours of Thursday an austerity package needed to unlock international aid and avert bankruptcy, defying political rifts and violent protests.

CLIFF EDGE LOOMS

The dollar was up 0.1 percent, near a two-month high against a basket of major currencies of 80.924 .DXY hit on Wednesday, as concerns about U.S. fiscal problems raise its safe-haven appeal.

Investors fear the preservation of the status quo in Washington after this week's elections means may make it hard to reach a deal on about $600 billion in spending cuts and tax increases due to start early next year, and that this could derail the U.S. economic recovery.   Continued...

 
A share trader sits next to a TV showing news on U.S. Republican presidental candidate Mitt Romney, in front of the German share price index DAX board at the German stock exchange in Frankfurt November 7, 2012. REUTERS/Lisi Niesner