We saw the euro drop off to fresh lows against the US dollar early yesterday morning, hitting its weakest level since this time last year. As the US dollar continues to gather momentum across the board, the euro, in turn, is increasingly undermined by European Central Bank (ECB) policy that is seemingly shifting further towards increased support measures.
We could see the euro somewhat range-bound this week as traders look towards Friday’s inflation data, with traders unwilling to make any significant bets before the release. Inflation has been singled out as the primary gauge for future monetary policy decisions, and the figures are forecast to come in at 0.3% year-on-year. This is a drop from the previous figure of 0.4% and way below the ECB’s target, so if we see a significant deviation from the forecast, we can expect markets to respond swiftly. Despite the euro’s drop against the dollar, it held relatively firm against sterling.