Currency Note Euro

Today’s German inflation data a worry for the euro

By Smart Currency February 27th, 2014

The euro weakened against the US dollar and sterling yesterday afternoon despite an absence of any major data releases from any of the countries that use the common currency. The weakening of euro against sterling was supported by a statement from Bank of England policymaker Ben Broadbent. He observed that sterling’s current position against other currencies reflected the current strength of the UK economy. This gave investors confidence that the central bank is happy with a stronger pound and is not currently considering any policy changes that would affect this drastically. Sterling’s gain is euro’s loss as the news led the already troubled euro to weaken further..

Today there is potential for the euro to experience a fair amount of movement as a result of some key data releases from within the euro nations. German inflation figures are set to be released and these may have an impact on how the euro performs. The reason for this is because low inflation is likely to spur the European Central Bank (ECB) into taking actions that impact negatively on a currency, such as lowering interest rates, and this action could take place as early as next week as this is when the ECB next meets. In addition to these figures, the Money Supply figures are due out which show how much people and businesses have been borrowing. Higher figures are usually better for a currency as increased borrowing shows confidence in economic conditions. Overall, both of these data sets are typically of moderate importance and are only likely to have a significant impact on the strength of the euro if they deviate notably from the expectations of currency traders and commentators.

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