Expectations that the European Central Bank might move as soon as next month to fuel growth by cutting interest rates were damped yesterday when statistics showed faster-than-expected money supply growth in June.
The euro's 7.2 percent drop against the dollar this year has come as the ECB, faced with evidence of slowing growth in the region, has lowered its benchmark interest rate once this year -- by 25 basis points to 4.5 percent.
A 6.1 percent rise in euro-zone money supply suggests inflation will accelerate in coming months, and the ECB has cited inflation risks as a reason for not reducing borrowing costs more.
"With the higher M3 growth I don't think the ECB is motivated to move right now, and that's a drawback for the euro," said Malpede at Refco.
Only three of the 31 economists surveyed by Bloomberg News expect the ECB's rate-setting council to reduce borrowing costs from 4.5 percent at its Aug. 2 meeting, while two-thirds said it would do so on Aug. 30.
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