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Euro poised to take its cues from Draghi

London - The euro was little changed versus the dollar as traders prepared to pick through Mario Draghi’s remarks on how global market turmoil will affect interest rates and inflation.

The shared currency was about mid-table versus its 31 major peersbefore the European Central Bank president speaks at a press conference in Frankfurt to explain the latest rate decision.

All 42 analysts in a Bloomberg survey predict policy makers will keep the deposit rate unchanged at minus 0.3%. The euro rose most against currencies from commodity- exporting nations as oil futures traded in London languished at the lowest since 2003.

“The euro could remain volatile until the ECB,” said Manuel Oliveri, a foreign-exchange strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “We don’t expect the ECB to cut rates at this meeting as they just did one in December. On the other hand, downside risks to inflation rose of late.”

The euro was at $1.0897 as of 14:06, having gained and fallen by at least 0.2% earlier. It rose most versus Russia’s ruble, which was undermined by oil’s drop below $28 a barrel.

G-10 currencies

The euro has strengthened against every Group-of-10 currency apart from the yen and Danish krone this year as a stock-market rout and concerns global growth is slowing boosts demand for havens. While the euro region faces a number of challenges, its positive trade position means it doesn’t need to rely on foreign capital to finance its deficit.

The ECB, whose main remit is to ensure inflation meets its target of just under 2%, already cut the deposit rate further below zero in December. It also extended its quantitative-easing program, though the measures disappointed some investors after Draghi repeatedly pledged action to boost the lackluster economy in the run-up to the gathering.

This time around investors will be watching for hints the Governing Council is gearing up for fresh stimulus as soon as the next meeting in March. Oil prices have fallen more than 30% since the December 3 meeting, and core inflation remains stuck at 0.9%. More stimulus tends to weaken a currency by expanding the money supply.

“A cut seems unlikely today, but if they did announce a surprise decision it would obviously be euro-negative,” said Mark Dowding, money manager and partner at BlueBay Asset Management LLP in London. “The market is prepared for the key event. The current trend in oil prices means the ECB is miles away from ever meeting its mandate.”

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