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Euro Slips Below $1.35 On ECB Worries

Published 11/05/2013, 05:55 AM
Updated 05/14/2017, 06:45 AM

After briefly reaching above $1.35 following the release of Monday's PMI data which showed the bloc's manufacturing sector picked up in October, gains were mitigated by speculation that the European Central Bank could cut its main interest rate at the policy meeting on Thursday.

The common currency slipped back to $1.3495 at 5:44 GMT on Tuesday morning.

Reuters reported that eurozone manufacturing PMI rose to 51.3 in October from 51.1 in September. The data was in line with economists' forecasts and climbed further from the 50 point mark which separates expansion from contraction. Although the figure gave the common currency a modest boost, it wasn't enough to overcome investor speculation that the ECB may soon cut its main interest rate.

Inflation data from last week has many expecting that the central bank will soon step in with policy easing. The data showed that the eurozone inflation rate had fallen to 0.7 percent, well below the bank's two percent target.

Although bets are on for a rate cut sooner than expected, most aren't expecting the bank to make any major moves at its November meeting on Thursday. Instead, Europe's central bank will likely hold off on a rate cut until December and revise its forecast for 2014, taking the inflation rate down, possibly below 1 percent.

Investors will probably exercise caution in the coming days with the looming ECB meeting and important US data on the horizon. US payrolls data due out on Friday could overshadow the ECB's decision as most are anxiously awaiting the US figures for more information about the impact of October's government shutdown.

BY Laura Brodbeck

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