The euro posted a huge drop this week, falling against most of other major currencies. The shared 17-nation currency dropped for the first week in five against the Great Britain pound and the first time in seven weeks against the Japanese yen.
The week started with a decline of the euro, but at that time it did not look anything but a minor correction after an incredible rally. The currency rose a bit ahead of the European Central Bank’s policy meeting as traders were not expecting any change to the policy. And indeed, the central bank did not make any noticeable changes, yet its President Mario Draghi spoiled the market sentiment nevertheless, mentioning “downside risks stemming from weaker economic activity and, more recently, the appreciation of the euro exchange rate”. Such words spurred speculations that the ECB may intervene on its next meeting if the currency will not fall by itself.
The euro fell against most majors after that statement including the yen, which was weak by itself, but supported by comments of some politicians. The market sentiment did not turn to outright risk aversion, but appetite for risk was hurt significantly.
EUR/USD fell from 1.3650 to 1.3364 this week. EUR/JPY slid from 126.61 to 123.94 after touching 127.67 — the strongest level since April 2010. EUR/GBP slumped from 0.8695 to 0.8458.
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