The euro started the week on unstable footing, losing ground from Monday to Wednesday. A couple of disappointing data releases from Germany, the European bloc’s flagship economy, came in the form of inflation figures on Monday and Manufacturing Purchasing Managers’ Index on Wednesday. The figures were further indication of the troubled times that the Eurozone is facing, with the thus-far unfettered German economy starting to show a soft underbelly.
The figures early in the week fuelled speculation that when European Central Bank (ECB) President Mario Draghi spoke yesterday he would give some categorical indication of further stimulus measures (most likely in the form of asset-back security purchases). In actuality, Draghi was very vague with his announcement, pushing traders who had previously bet against the euro onto the back foot. As a result, the euro enjoyed its best day in a number of weeks, gaining against most of its peers and almost a cent against sterling. Sentiment in the market still remains heavily against the single currency, however, so we expect this recovery to be merely a short-term response to Draghi’s comments.
Looking forward to today we have influential Services Purchasing Managers’ Index (PMI) figures from across the Eurozone being released throughout the morning.