The euro made a brighter start to the week yesterday after a prolonged period where the single currency was slumping across the board. Eurozone inflation data, in the form of the Consumer Price Index released yesterday morning showed inflation in the eighteen-nation bloc to be down again at 0.5%. This was expected and therefore had a limited effect on movements in euro rates. The reason for the euro’s more positive performance seems to be more technical than data-influenced as we saw it avoid the 1.35 threshold against the US dollar and make a modest recovery, whilst hovering around the 1.25 mark against sterling.
A number of key institutions see the single currency falling more sharply against the US dollar should we see the resistance around 1.35 broken, reinforcing this as a key level to watch. Data may play a bigger role during the day today as we await the release of German Economic Sentiment data. This is compiled from a survey of investors and analysts from the Eurozone’s largest economy and serves as an important forecast of future economic activity. The level of optimism revealed can have a notable bearing on performance.