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FOREX-Euro stung by weaker data as Draghi gives ECB swansong

Published 24/10/2019, 13:29
© Reuters.  FOREX-Euro stung by weaker data as Draghi gives ECB swansong
DXY
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* Euro falls after weaker-than-forecast PMIs

* Dollar steady with no trade war developments

* Brexit limbo keeps pound below recent highs

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details after ECB decision)

By Sujata Rao and Elizabeth Howcroft

LONDON, Oct 24 (Reuters) - The euro erased its earlier gains

on Thursday after business surveys pointed to stagnating

economic momentum in the euro zone, ahead of Mario Draghi's

final news conference as president of the European Central Bank.

The ECB kept rates on hold and its ultra-easy monetary

policy unchanged. Investors will be watching Draghi's news

conference from 1230 GMT for any reference to a rift among

policymakers about stimulus plans designed to reinvigorate the

economy.

The weakness of business in the region was reaffirmed on

Thursday when IHS Markit's flash composite purchasing managers'

index for October, seen as a good guide to economic health, came

in below forecasts and perilously close to the line separating

growth from contraction. The euro was unchanged after the ECB's decision. It had

earlier given up initial gains on the weaker than expected

Purchasing Managers' Index and was last flat on the day at

$1.1126 EUR=EBS , having earlier traded at $1.1163.

The dollar index was flat on the day at 97.498 .DXY .

"Today is going to be all about the ECB," said Rabobank FX

strategist Piotr Matys. "We don't expect the ECB to change the

parameters of its monetary policy," but Draghi may use his last

meeting to encourage governments to use fiscal measures to

propel growth.

A trio of central bank meetings were being held on Thursday,

including the ECB, the Swedish Riksbank and Norway's Norges

bank.

The Swedish crown rose to its strongest against the dollar

since mid-August and gained as much as 0.7% against the euro

after the Riksbank stuck to its plan for raising rates in

December, though it said the rate path after that was not yet

clear. SEK=D3 EURSEK=D3 It kept rates steady at -0.25%.

The Norwegian crown strengthened 0.2% against the euro as

the Norges Bank said rates were likely to be held at the current

1.5% rate. EURNOK=D3 . The move was contained by the Swedish

crown's rise. The Norwegian currency was unchanged versus the

dollar NOK=D3 .

"We don't think that the SEK gains will last for long,

because this interest rate increase may be interpreted by the

market as a policy rate mistake," said Petr Krpata, chief EMEA

FX strategist and IR strategist at ING, suggesting the bank may

be "hiking into a downturn".

Krpata noted that the Norwegian crown strengthened in line

with the Swedish crown, meaning that its strength is "spillover

from the Riksbank decision".

The Norwegian crown recently reached a record low to the

euro and an 18-year low to the dollar despite rate hikes this

year.

Most Asian currencies edged up in the absence of

developments in the Sino-U.S. trade war. The Australian dollar was down 0.3% AUD=D3 versus the U.S.

dollar and the New Zealand dollar fell as much as 0.5% NZD=D3 .

The pound weakened 0.2% to $1.2896, having chalked up 6%

gains since Irish and British leaders said they could "see a

possible pathway to a deal" on Oct. 10. GBP=D3 .

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