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Weekly roundup: Negative Eurozone inflation surprise weighs heavily on euro ahead of ECB meeting

currency-newsWeekly roundup: Negative Eurozone inflation surprise weighs heavily on euro ahead of ECB meeting
EUR investors were caught off guard last week as the Eurozone inflation rate unexpectedly dipped to -0.4% in August, dragging the euro lower across the board.

This fall into negative inflation pushed the consumer price index even further away from the European Central Bank’s (ECB) 2% target, raising the odds of further policy action to come.

A sharp monthly increase in Spanish unemployment added to the bearish mood, with markets seeing little reason to bet on an imminent turnaround.

Looking ahead to this week’s session, confirmation that the Eurozone gross domestic product remained in a state of sharp contraction in the second quarter may put additional pressure on the single currency on Tuesday.

However, the impact of the updated GDP report could still prove limited if July’s German trade data offers investors cause for confidence instead.

Evidence of stronger trade conditions for the Eurozone’s powerhouse economy may fuel a EUR exchange rate rally, even though the risk of additional economic disruption to come remains.

The biggest movement in euro exchange rates may be driven by the European Central Bank’s latest monetary policy decision. While no changes are expected, revisions in the ECB’s inflation forecasts and other hints of future stimulus could weigh on EUR.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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