The euro fell sharply to daily lows against the US dollar on Monday, after European Central Bank board member and Bank of Estonia Governor Ardo Hansson said that the central bank does not rule out the possibility of a new rate cut.
EUR/USD touched a session low at 1.3508 at 10:25 GMT, after which consolidation followed at 1.3517, falling 0.29% for the day. Support was likely to be received at November 22nd low, 1.3463, while resistance was to be encountered at November 22nd high, 1.3558.
The common currency lost ground against the greenback after ECB board member Ardo Hansson said that the central bank was ready to reduce the benchmark interest rate further, while also being “technically ready” to introduce negative rates on bank deposits.
“The options on rate cuts are still not fully exhausted and there are all kinds of other measures that are still on the table,” Hansson said in an interview in Tallinn on November 22nd, cited by Bloomberg News. “Of course, every time you use one option, you have one less to use. But I don’t see us, by any means, running out of our toolkit of things we can draw on.”
These comments came amid growing concerns that inflationary pressure in the Euro zone was weakening, especially after Octobers annualized index of consumer prices fell to levels unseen in four years to reach 0.7%, which urged the ECB to cut its benchmark rate to a new record low level of 0.25% at its meeting on policy this month.
The preliminary value of the harmonized index of consumer prices in the Euro region is scheduled to be announced on November 29th, ahead of ECBs next policy meeting on December 5th.
In addition, earlier on Monday it became clear that business confidence in France remained without change in November compared to October, but yet, still below the average historic value of 100. The gauge of business confidence in the sector of manufacturing stood at a reading of 98 in November, while preliminary estimates pointed a decrease to 97. This came as evidence that business in the country demonstrated signs of stagnation, especially after most recent GDP report revealed that economy contracted during the third quarter of the year, in part due to weaker business investment activity. The above mentioned result came also in consonance with the indexes of business activity (PMI) in France, which pointed an unexpected contraction in November. All in all, this series of data dampened expectations of a resilient economic recovery, after the long recessionary period.
Meanwhile, later in the day the National Association of Realtor’s (NAR) will release a report on pending home sales in the United States, an indicator for the future housing market activity. The median estimate of experts pointed a 2.0% gain in October compared to a month ago, after in September sales declined 5.6%. Better than projected results will certainly provide support to greenback’s demand.
Elsewhere, the euro was steady against the pound, with EUR/GBP cross dipping 0.05% on a daily basis to trade at 0.8352 at 13:13 GMT. EUR/JPY pair, on the other hand, was gaining 0.23% to trade at 137.62 at 13:13 GMT.