Yesterday we forecast that the Euro would continue advancing on the Pound as upbeat reports for the Eurozone counteracted the impact of last week’s concerning inflation figures.
However, the prospect of the European Central Bank intervening to prevent a deflation crisis remains a persistent concern, and the Euro declined against the majority of its rivals in response to comments issued by ECB President Mario Draghi.
According to Draghi, European policy makers are considering bringing an end to the sterilisation of crisis-period asset purchases.
In response to the Euro’s movement Ian Stannard of Morgan Stanley commented; ‘The policy debate at the ECB is gaining some momentum, which is going to be negative for the Euro. We see Euro rebounds as providing a selling opportunity. We are looking for an initial move down to 1.33 US Dollars.’
The Euro was little affected by producer price figures for the Eurozone but did extend declines against the Pound following the release of better-than-forecast UK construction PMI.
As forecast by economists, producer prices in the currency bloc increased by 0.2 per cent in December, month-on-month, and declined by 0.8 per cent on the year.
Although investors will largely be looking ahead to Thursday and the ECB rate announcement, there are several pieces of Eurozone data scheduled for publication tomorrow which might trigger Euro movement.
From 08:45 GMT final services PMI figures for the currency bloc and its major economies will be released.
Preliminary estimates put the German services gauge at 53.6 and the Eurozone’s services measure at 51.9.
The Eurozone retail sales report is due out at 10:00 GMT.
As Germany’s retail sales figures for December showed an unexpected drop, sales in the currency bloc may also have declined following November’s 1.4 per cent month-on-month advance.
Any negative surprises could add to the case for the ECB introducing additional stimulus and may push the Euro lower.
Tomorrow’s UK services PMI could also impact the EUR/GBP pairing.
Later today the Euro may recover losses against the US Dollar if US factory orders drop by the 1.8 per cent forecast.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8269,
Euro,,US Dollar,1.3509,
Euro,,Canadian Dollar,1.5012,
Euro,,Australian Dollar,1.5183 ,
Euro,,New Zealand Dollar,1.6577 ,
US Dollar,,Euro ,0.7402,
Pound Sterling,,Euro,1.2090,
Canadian Dollar,,Euro,0.6660 ,
Australian Dollar,,Euro,0.6580,
New Zealand Dollar,,Euro,0.6025 ,
[/table]
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