The euro fell for a second day against the dollar on speculation the European Central Bank will begin charging lenders to deposit spare cash with it.
The shared currency slid versus all but one of its 16 major peers as factory output slid more than analysts forecast. The ECB is “very seriously” considering negative deposit rates, Reuters reported policy maker Benoit Coeure as saying. The pound rose the most in three weeks versus the euro as the Bank of England said the U.K.’s economic recovery is gaining momentum. The dollar fell against the yen before data tomorrow that analysts said will show U.S. retail sales stalled in January.
“Such comments make clear that additional policy action is being considered as monetary conditions have been tightening,” said Manuel Oliveri, a foreign-exchange strategist at Credit Agricole Corporate & Investment Bank in London. “They strongly cap ECB monetary policy expectations and that comes to the detriment of the euro. We expect the euro to trend lower over the coming few weeks as we also think that the ECB should do more.”
My view: Watch the Euro Yen cross pull back now. It's risk off time!