Yesterday was a quiet day for the euro as it remained relatively stable against the US dollar – hovering around the 1.38 mark – and weakened slightly against sterling. German Economic Sentiment data came through weaker than expected, highlighting the more sceptical outlook from analysts in the Eurozone’s biggest economy. This failed to have much of an immediate effect on euro rates yesterday, although these worries may have a greater effect in the long-term if concerns by analysts over the escalating situation in Ukraine and continued slowdown in Chinese growth are justified.
Eurozone Consumer Price Index data is due out today, which has the potential to affect the performance of the single currency. The Consumer Price Index (CPI) is a key inflation indicator and traders are interested to see how far the actual inflation figure is from the European Central Bank’s 2% target. Generally, inflation rates are positively correlated with central bank interest rates and thus lower figures will cause the euro to weaken. With this in mind, we may see some movement in euro rates today; however, it should be remembered that the impact of these figures may be lessened by the earlier release of the Flash CPI Estimate and Preliminary German CPI data.
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