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Euro drops on dismal reports, Fed eyed

Euro drops on dismal reports, Fed eyed

The euro traded lower for the first time in three sessions on Wednesday after the release of downbeat data from the euro area that raised expectations the ECB would add stimulus in September to boost the economy.

Economic data released today from the European Union's Bureau of Statistics showed that economic growth in the eurozone halved from April to June, while inflation fell sharply in July.

The preliminary estimates of GDP growth in 19 nations sharing the euro slowed to 0.2 percent on a quarterly basis, down from 0.4% in the previous three months. On the annual basis, the growth pace slowed to 1.1 percent from 1.2 percent.

As slowdown in economic growth in the region was reflected of course on consumer price growth, where data showed that the annual inflation rate for the euro zone in July retreated to a 17-month low of 1.1 percent from 1.2 percent in June.

This inflation rate is still far from the ECB’s target of close to 2 percent. So, the ECB may need to stimulate the economy in the coming period.

The euro fell on Wednesday ahead of the Fed's interest rate decision later today, as policymakers are expected to slash interest rates for the first time in 10 years.

With the interest rate cut already a quarter percent, the main focus has been on whether the Fed will announce more easing later in an effort to keep the prevent the negative impacts from the slowing global economy and the repercussions of trade disputes.

As of 12:00 GMT the European common currency fell about 0.05 percent to 1.1147 versus the dollar after hitting a bottom at 1.1143.

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