REUTERS
Expectations for a fresh shot of stimulus from the European Central Bank on Thursday pushed down the euro and government bond yields in the morning, after New Zealand set the bar high with a surprise rate cut that sent its currency tumbling, Reuters reported.
The euro was down at $1.0970, while euro zone bond yields from Germany to Greece were slightly lower as traders did some final buying ahead of the ECB's 1245 GMT interest rate decision and 1330 GMT news conference by governor Mario Draghi, Reuters reported.
Having disappointed markets with an unspectacular package of measures in December, the bank's policymakers have tried to avoid stirring up speculation ahead of this meeting – although that hasn't stopped eager economists.
The latest Reuters poll shows bets are on at least another 10 basis points being sliced off its already negative -0.3% deposit rate and the bank adding another EUR 10 billion a month to its 1.5 trillion euro bond-buying program, according to the report.
"The market is a bit wishy washy, not a whole lot is priced in because of the doubts over whether they (ECB) can really deliver," said Saxo bank head of FX strategy John Hardy.
"So if you get some real innovation from the ECB you will see a big reaction from the euro," he said.
Oil prices, one of the main drivers behind the rapid fall in inflation which has been such a headache for central banks like the ECB, were steady in early European trading, with benchmark Brent futures LCOc1 holding at just over $40 a barrel.
The big surprise in Asia overnight came from New Zealand's central bank, which pre-empted the ECB by cutting its main interest rate to a record low 2.25%.
The Kiwi dollar tumbled to $0.6618 as Reserve Bank of New Zealand Governor Graeme Wheeler cited China as a major risk to the bank's outlook for economic growth and inflation, reflecting global concerns over a slowdown in the world's second-biggest economy, according to the report.