FOREX-Euro stung by weaker data ahead of Draghi's ECB swansong

Published 24/10/2019, 12:29
FOREX-Euro stung by weaker data ahead of Draghi's 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

(Recasts on the euro, adds details, updates prices)

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, while the Swedish crown

rallied after its central bank stuck to its plan for a December

interest rate hike.

In a busy day for central banks, European Central Bank

President Mario Draghi holds his final press conference after

the rate decision, which is due at 1145 GMT.

While no major announcements are expected and rates are set

to be left unchanged, investors will be closely watching the

news conference for any reference to a rift among policymakers

about stimulus plans designed to reinvigorate the economy.

The weakness of the region was reaffirmed on Thursday when

IHS Markit's flash composite PMI for October, seen as a good

guide to economic health, remained perilously close to the 50

mark that separates growth from contraction and below forecasts.

The euro gave up earlier gains, particularly after a weaker

earlier German reading of the Purchasing Managers' Index, and

was last flat on the day at $1.1129 EUR=EBS , having earlier

traded at $1.1163. The dollar index was flat on the day at 97.494 .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 0.6% 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 slipped 0.1% against the euro as the

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

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

crown's rise. The Norwegian currency gained 0.1% 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 0.2% AUD=D3 versus the U.S.

dollar and the New Zealand dollar fell as much as 0.4% NZD=D3 .

The pound weakened 0.2% to $1.2893, 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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