The euro had a relatively uneventful start to the week yesterday as it hovered around the 1.37 mark against the US dollar and made modest gains against sterling. There were no major data releases from the Eurozone yesterday, with the only activity of note being an address by the President of the German Central Bank – The Bundesbank – Jens Weidmann. Weidmann’s words did not cause decisive investor action, but did contribute to the continuing uncertainty regarding European Central Bank (ECB) action at the next meeting and any effects as a consequence of such action. While lower interest rates and increased monetary stimulus generally cause a currency to weaken, Weidmann discussed the possibility of such moves having a converse effect as a result of lower bond yields and the fact that such moves are already largely priced into the market. Speculation will continue in the run up to the meeting on 5th June and discourse from leading economists and decision makers has the potential to spur rate movements.
The early part of this week is relatively quiet in terms of data. with the only figures of note due out today being the German Producer Price Index. This is a key inflation indicator and may cause limited movements in euro crosses.
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