The unexpectedly steep decline in Germany’s ZEW economic sentiment measure weighed heavily on the Euro during the European session and the Euro to USD pairing slipped.
The common currency posted widespread declines in the wake of the development and continued trading lower against the US Dollar into North American trading.
The Federal Reserve has previously voiced concerns regarding subdued prices in the US and today’s domestic inflation report confirmed that the US CPI remained below target levels in February.
Consumer prices advanced by 0.1 per cent last month, the same gain recorded in January.
On the year consumer prices were up just 1.1 per cent, down from 1.6 per cent in January and less than the 1.2 per cent forecast by economists.
During the last FOMC meeting policy makers voiced concerns regarding too-low inflation and this report may well fuel those fears at tomorrow’s gathering.
Bloomberg News quoted one industry expert as saying; ‘From the point of view of the Fed, the persistent weakness in inflationary pressures in recent months will likely argue for more vigilance and keep concerns about the slow pace of domestic resource slack absorption front and centre. Moreover, the subdued inflation backdrop will continue to argue for the maintenance of a high level of policy accommodation for an extended period of time.’
Separate labour department figures showed that inflation-adjusted weekly earnings were unchanged in February from January.
This news may not have been the most upbeat but the US Dollar was supported as separate data showed that US building permits leapt in February, climbing 7.7 per cent month-on-month following a decline of 4.6 per cent which was smaller than forecast.
However, US housing starts declined by 0.2 per cent in the same period.
The Euro came under additional pressure as investors turned to safe-haven assets in response to the news that a Ukrainian soldier was wounded in a shooting in Crimea shortly after Russian President Vladimir Putin signed a treaty to make Crimea part of the Russian Federation.
Tomorrow EUR/USD movement could be triggered by Eurozone construction output figures, but investors will largely be focusing on the Federal Open Market Committee’s policy announcement.
Euro (EUR) Exchange Rates
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