That the ECB will launch a large-scale sovereign bond-buying program at its Jan. 22 meeting is no longer in question, but what is unknown is how the plan will be designed and whether it will be seen as credible and sufficient. Further stirring expectations for imminent action, media reports suggested ECB President Mario Draghi met with German Chancellor Angela Merkel last week to smooth the path for quantitative easing, which is staunchly opposed by the Bundesbank. Whatever the outcome, traders said there is sure to be plenty of volatility at the end of this week. But for now, with the U.S. markets shut on Monday for a public holiday and little in the way of market-moving economic data, currency markets could be in for a relatively slow session. On Tuesday, investors will get an update on China’s fourth-quarter growth numbers. Meanwhile the euro flirted with 11-year lows early on Monday as investors braced for the European Central Bank to take its boldest steps yet to combat deflation and revive the euro zone economy. The common currency last traded at $1.1561, not far from a trough of $1.14595 hit on Friday. Against the yen, it fetched 135.71, near a three-month low of 134.70. The common currency struggled also near a four-month trough against the Australian dollar and a record low on the New Zealand currency. On the Canadian dollar, the euro remained within reach of a 16-month trough of C$1.3749 set on Friday. Pressure on the euro intensified last week after the Swiss National Bank shocked markets by abandoning its three-year-old currency cap, effective removing a pillar of support for the euro. Brent crude jumped 3.9% on Friday after IEA cut its output forecast ex-OPEC and more U.S. rigs halted drilling.
Read the full report: FX Daily