By Yasin Ebrahim
Investing.com – The euro fell sharply against the dollar on Wednesday, on growing expectations the European Central Bank will roll out more stimulus after the central bank flagged the sharp rise in the single currency as a concern.
EUR/USD fell 0.65% to $1.1833.
“The market is likely expecting more stimulus from the ECB,” said Erica Blomgren Dalsto, strategist at Scandinavian bank SEB, according to the Financial Times.
In the run-up to the European Central Bank meeting next week, some members from the bank have voiced concerns over the sharp rise in the euro, adding to expectations that stimulus will come sooner rather than later.
The ECB's Chief Economist Philip Lane said Tuesday that the euro’s level "does matter" for monetary policy. A stronger currency generally weighs on export growth and curbs import prices, leading to a slowdown in inflation.
Others, meanwhile, have suggested that recent signs of slack in the eurozone economic recovery could prompt the central bank to expand its pandemic emergency stimulus program, which was rolled out in March this year.
"Seeing the strength of the EUR (ECB's Lane commented yesterday that it "does matter"), more structural elements to the weak inflation and details in yesterday’s PMI manufacturing releases putting question marks behind the persistence of the recovery, it still appears more likely that there will be an increase in the asset purchase envelope at some stage, if only in December," ING said.