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Euro hits new dollar-low before ECB meeting

Thursday, December 4, 2014 - 20:04
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European stock markets rose while the euro hit a two-year low against the dollar on Thursday as the European Central Bank prepared to announce the outcome of its key policy meeting.

[LONDON] European stock markets rose while the euro hit a two-year low against the dollar on Thursday as the European Central Bank prepared to announce the outcome of its key policy meeting.

The Bank of England was to also give its latest interest-rate decision.

Approaching midday in the British capital, London's benchmark FTSE 100 index edged up 0.05 per cent to 6,720.15 points.

Frankfurt's DAX 30 rose 0.49 per cent compared with Wednesday's close to 10,020.95 points and the CAC 40 in Paris won 0.41 per cent to 4,409.67.

The European single currency sank to US$1.2296, the lowest point since August 2012, before pulling higher.

Asian stock markets closed higher Thursday following record close overnight on Wall Street, as investors cheered an upbeat report on the economy from the US central bank.

The European Central Bank and Bank of England will both announce their latest monetary policy decisions on Thursday.

The BoE is widely expected to keep it key interest rate at 0.50 per cent, where it has stood for almost six years, while the ECB will likely prime markets for new anti-deflation measures, according to traders.

Given the alarming drop in eurozone inflation in recent months, the heat has risen on the ECB to undertake massive stimulus measures like central banks in Britain, Japan and the United States have done.

Falling prices may sound good for the consumer, but they can trigger a vicious spiral where businesses and households delay purchases, throttling demand and causing companies to lay off workers.

"We have rate verdicts from both the Bank of England and the ECB - no surprises expected at the former but (ECB head) Mario Draghi still has a mountain to climb in terms of dragging the currency bloc out of its current economic malaise," said Tony Cross, market analyst at trading group Trustnet Direct.

After pulling back from its low, the euro stood at US$1.2315, up from US$1.2308 late in New York on Wednesday.

While the euro has been sold ahead of the meeting, expectations are that the ECB will hold fire but signal a move in the new year.

"Even if it does not step up its actions just yet, it will choose language for the statement that makes additional easing a near certainty for the first quarter of 2015," said Berenberg Bank economist Christian Schulz.

Elsewhere on Thursday, the dollar struck a fresh seven-year high of 119.98 yen.

On the London Bullion Market, gold fell to US$1,204.26 an ounce from US$1,204.75 on Wednesday.

AFP