Euro Holds Steady despite Weekend Events in Ukraine

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Euro Holds Steady despite Weekend Events in UkraineThe euro held steady against the yen and dollar on Monday, largely ignoring the recent weekend referendum on self-rule in Ukraine which stoked the simmering tensions further.

However, the euro touched its lowest level in 16 months against the pound as traders speculated that the European Central Bank will loosen monetary policy at a time when the Bank of England is about to hike interest rates.

“We think that near-term data is likely going to allow market participants to continue to romance the possibility that the Bank of England becomes the first of the G4 central banks to embark on policy tightening,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at the Royal Bank of Scotland, told Reuters.”Certainly the stronger data is likely to lead the market to see the BOE’s dovish message as perhaps a bit less credible.”

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The euro declined to a low of 81.43 pence, its lowest against the U.K. currency since January last year. The pound surged 0.12 percent to $1.6870. The euro rallied 0.06 percent versus the U.S. dollar to $1.3765, after earlier declining last week from $1.3995, its strongest level in 2 ½ years.

The euro also rose 0.24 percent to trade at 140.51 yen. The dollar edged up 0.25 percent to 102.10 yen.

Any further advances of the euro were dashed by head of Austrian Central Bank Ewald Nowotny, who said interest rate cuts alone are insufficient to fight the stubborn deflation in the euro zone.

Nonetheless, most traders said the market was cool after last week’s frenzy that resulted from ECB President Mario Draghi’s comments that hinted that the bank may ease monetary policy next month.

The financial markets also seemed unperturbed by events in Eastern Ukraine over the weekend, where pro-Russian rebels boasted of victory after voters overwhelmingly voted for self-rule. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com