Draghi's Comments Increase Easing Speculation

The euro began the week below $1.24 on speculation that the European Central Bank will ease further at its December meeting. The common currency traded at $1.2378 at 7:00 GMT on Monday morning as investors analyzed comments made on Friday by ECB President Mario Draghi.

The Wall Street Journal reported that Draghi said the bank is looking to “step up the pressure” by increasing its balance sheet if inflation figures continue to deteriorate during a speech at a banking conference. Though the ECB has been reluctant to implement a large scale quantitative easing package like that seen in the United States, Draghi’s comments on Friday show that the bank may have changed its tune in the face of falling inflation, sky high unemployment and an economy on the brink of recession.

Several of the bloc’s Finance Ministers have been very vocal about their disapproval of more easing in the eurozone, saying that the real changes need to be made within individual member countries themselves before the bank can do any more. They argue that the bank shouldn’t continue flooding the market with cash until the region’s financial system has been repaired.

With the ECB set to meet next week, investors have begun to place their bets that more easing is on its way. Despite some division within the ECB, most expect that Draghi’s comments mean that the bank is willing and able to announce more easing at its December meeting.

Moving forward, markets will be looking for economic data from the bloc to provide more reason for the bank to ease in December. Later in the day, Germany’s Ifo business sentiment survey will take top billing among the reports due out.