After beginning the week sluggishly against the US Dollar the Euro enjoyed something of a rebound yesterday as positive domestic news and disappointing US data pushed investors away from the ‘Greenback’ and towards the common currency.
During European trading the Euro was supported by reports showing growth in the Eurozone’s services sector and a pick-up in investor confidence.
The Euro was able to consolidate gains as separate figures confirmed that German inflation picked up at the end of last year, with consumer prices increasing by 0.4 per cent on the month.
Annual inflation increased from 1.3 per cent to 1.4 per cent and the results were largely reflective of economists’ forecasts.
However, the data did indicate that inflation in Germany remained below the European Central Bank’s target, adding to the deflationary concerns hovering over the Eurozone as a whole.
As ING economist Carsten Brzeski noted; ‘Today’s German inflation data provide little arguments for the ECB to relax its fight against deflation in the euro zone’.
The Euro’s more assured performance against the Pound was aided by the news that the US services sector expanded at a slower pace than forecast in December.
The US ISM non-manufacturing gauge came in at 53.0 rather than the 54.7 forecast.
While the reading remains above the 50 mark separating growth from contraction, it was down from 53.9 in December and adds to the case for the Federal Reserve refraining from trimming stimulus further for the foreseeable future, allowing the Euro to edge away from its previous one-month low against the ‘Greenback’.
However, some investors believe that any strength in the EUR/USD pairing is likely to be short lived.
In the words of one London-based currency strategist; ‘The ISM data was just one thing — U.S. data has been surprising on the upside.In the short term, euro-dollar will stay in the current range. Looking forward, as tapering continues, and even as the ECB remains on hold, the euro will gradually weaken.’
Today the main causes of EUR/USD movement are likely to be German retail sales/employment figures and the US trade balance report.
Euro (EUR) Exchange Rates
As of 07:00 am GMT
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3621 <
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8307 >
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.5277 >
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6437 <
The Euro/ Canadian Dollar Exchange Rate is currently in the region of: 1.4550 >