Euro (EUR) Exchange Rate Forecast: ‘Single Currency’ to Stay Under Pressure This Week
Concerns that the European Central Bank might introduce additional easing in order to support the Eurozone’s economic recovery were weighing on the Euro as European trading began.
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Although the common currency later staged a rebound thanks to impressive German sentiment data and the news that consumer prices in the Eurozone accelerated at a slightly faster pace than forecast, the Euro went on to trim gains.
Comments issued by ECB President Mario Draghi caused concern regarding potential action from the ECB over the weekend, although the financial chief did present a relatively upbeat assessment of the Eurozone’s future.
One of the central bank’s executive board members added fuel to the fire, with Peter Praet remarking that the ECB will do ‘whatever is necessary’ in order to restore price stability in the Eurozone. Praet went on to observe; ‘Today, our assessment is that with the recovery that we are seeing now, inflation will converge in the medium to long term, to the nearest 1 per cent, and in saying this I admit that price pressures are quite weak.’
As trading progressed on Monday the Euro trimmed earlier gains and weakened against several of its major currency peers.
While the Euro was initially supported by the news that consumer prices in the Eurozone climbed by 0.8 per cent in January, year-on-year, rather than gaining by the 0.7 per cent originally forecast, the reading was still below 1 per cent and far from the ECB’s target levels.
In the opinion of one senior analyst; ‘I see a decline in the Euro given the ECB is more likely to ease. Unless there’s additional easing, inflation will continue to slow.’
Meanwhile, separate data showed a better-than-forecast improvement in German business sentiment, with the German IFO business climate index rising to 111.3 in February – its strongest reading since July 2011.
Euro gains against the Pound were also limited as Sterling was supported by hawkish statements issued by Bank of England Governor Mark Carney.
The ECB is scheduled to meet next week and is expected to adopt a more decisive stance regarding the direction fiscal policy will take over the next few months.
Tomorrow final German growth figures may be the main cause of Euro movement.
Currently the Euro is trading against the Pound in the region of 0.8249 and is trading against the US Dollar in the region of 1.3728