London - The euro weakened as data showing growth in the currency bloc unexpectedly slowed in the third quarter boosted speculation the European Central Bank (ECB) will cut its deposit rate and expand its asset-purchase program next month.
The 19-member shared currency dropped toward a six-month low against the dollar as the data highlighted the possibility that the ECB could bolster its stimulus program next month even as the Federal Reserve looks set to raise US interest rates.
ECB President Mario Draghi said Thursday that quantitative easing will be extended if needed. The dollar climbed versus most of its 16 major peers before a report economists said will show retail sales in the US increased last month.
“Today’s European data will support Draghi’s dovish tone,” Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland, said before the euro-area report was published.
“The monetary policy divergence theme between the US and Europe has been on show this week. This US retail sales number could be big in further supporting a December rate hike but also trigger a conversation of a steeper Fed rate path.”
The euro dropped 0.4% to $1.0768 at 12:30. It touched $1.0675 on November 10, the lowest since April 23. The shared currency fell 0.4% to ¥132.10. The dollar rose less than 0.1% to ¥122.69.
While the start of the ECB’s €1.1trn bond-buying program in March pushed the euro to the weakest level since 2003, policy makers are still seeking a silver bullet to push inflation up from zero and encourage growth. The Governing Council is set to hold its final policy meeting of the year in Frankfurt on December 3.
Gross domestic product in the euro region rose 0.3% in the three months through September, data showed Friday, down from 0.4% in the previous period, which was also the median estimate of analysts in a Bloomberg survey.
The German and French economies each grew 0.3%, while Italy’s expanded 0.2%, separate reports showed.