€1 bought $1.13 as recently as early October.
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“The market is anticipating the ECB to act swiftly and decisively next week”, said DZ Bank strategist Christian Lenk. US Treasuries rose and stocks fluctuated as trading resumed after the Thanksgiving holiday.
Rhetoric from policymakers over the past few weeks has set expectations so high that there is a risk markets are disappointed no matter what the European Central Bank does.
Euro zone central bank officials told Reuters the ECB was considering a split-level deposit rate based on the amount of cash banks deposit with the ECB. Consumer spending (http://www.marketwatch.com/story/consumer-spending-barely-rises-again-in-october-2015-11-25) rose slowly in October for the second straight month, as Americans boosted savings and spent less on new cars and trucks. Australia & New Zealand Banking Group Ltd. estimates that movements in swap rates since the last meeting indicate that markets need Draghi to deliver at least a 14 basis point cut to the deposit rate along with an expansion of its quantitative easing program. The Shanghai Composite Index had tumbled 5.5 percent, its biggest retreat since the depths of a US$5 trillion rout in August, dragging down emerging markets as industrial profits sank and regulators clamped down on brokers.
Overnight bank-to-bank Eonia lending rates dated for the ECB’s December 3 meeting fell below minus 0.28 percent, reflecting expectations the bank could cut the deposit rate to as low as minus 0.35 percent, from the current minus 0.20 percent.
The euro was down 0.1 percent at $1.0615, having skidded on Wednesday to $1.0565, its lowest since mid-April (LSE: 0N69.L – news), before recovering.
Japan’s Nikkei ended the day up 0.5 percent.
Prices of many commodities like copper and nickel continued to hover near multi-year lows as the dollar held steady in the wake of mostly positive USA data released overnight. The rate is now negative 0.2 percent, meaning that private banks are effectively charged for parking money with the ECB.
“We did see some extended short positions on the euro coming in today, so they might have been covered a little bit there”, said Thierry Wizman, global interest rates and currencies strategist at Macquarie Limited in NY. Spot yuan opened at 6.3928 per dollar and was changing hands at 6.3942, 46 pips weaker than the previous close and about 0.04 percent away from People’s Bank of China’s midpoint rate of 6.3915.
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USA crude futures fell 1.4 percent to $42.45 a barrel as traders also unwound some of the buying they had made after Turkey shot down a Russian warplane earlier this week.
