Euro (EUR) Exchange Rate Stronger against Sterling, US Dollar as Eurozone Inflation Accelerates
Although today’s economic reports for the Eurozone have been mixed at best, the fact that core inflation in the currency bloc climbed by 1.0 per cent in April saw the Euro gain on the British Pound and the US Dollar.
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The Euro was modestly stronger against its peers as the Eurozone’s non-core consumer price index rose from 0.5 per cent to 0.7 per cent in April, year-on-year.
While this result was hardly encouraging, it wasn’t as dire as many industry experts had feared following yesterday’s German CPI disappointment.
Consequently, the odds of the European Central Bank (ECB) being pressured into introducing additional stimulus within the next couple of months fell, supporting the Euro.
Euro gains on British Pound and US Dollar
As the likelihood of below-forecast Eurozone inflation had been largely priced into the market, the common currency strengthened against Sterling and the US Dollar as European trading progressed.
According to economist Howard Archer, although this level of inflation isn’t what the central bank would wish, it may ‘slightly ease concerns about deflation.’
He added; ‘The ECB doesn’t see deflation as a substantial risk, but what they are concerned about is prolonged, very weak inflation, particularly below 1 per cent.’
The ECB is gathering next week and it will be interesting to see how the financial institution responds to this development.
In other news, German retail sales floundered in March, dropping by 0.7 per cent month-on-month – wiping out a negatively revised gain of 0.7 per cent in February.
Sales were 1.9 per cent lower on the year. Economists had expected an annual gain of 1.7 per cent.
Separate data showed that French consumer spending was down 1.2 per cent on the year (versus expectations for a 0.4 per cent decline) while the nation’s producer prices slipped 0.4 per cent on the month.
The situation was more positive in Spain however, as the region’s growth data came in just above expected levels. Spanish GDP advanced by 0.6 per cent in the first quarter YoY, more than the 0.5 per cent expansion anticipated.
Meanwhile, German unemployment plummeted by 25,000 in April, over twice the decline of 10,000 projected.
The German unemployment rate held at 6.7 per cent.
This marked the fifth monthly decline in German joblessness and indicates that the Eurozone’s largest economy is still performing well.
The EUR/GBP pairing was little-changed by a UK report showing a surge in British consumer confidence.
During North American trading EUR/USD fluctuations are liable to result from the publication of US GDP figures and the Federal Open Market Committee’s rate announcement.
Tomorrow Eurozone reports are limited, but global developments will be of interest.
Currently the Euro is trading against the British Pound in the region of 0.8220 and is trading against the US Dollar in the region of 1.3827.