Last week’s high: €1.1296
Last week’s low: €1.1209
Euro Softer as Weak Inflation Undermines ECB Tightening Odds
December’s raft of Eurozone manufacturing and services PMIs continued to paint an encouraging picture of the domestic economy last week, boosting demand for the Euro.
With the Eurozone looking set to maintain a strong level of economic momentum heading into 2018 this gave investors fresh cause for confidence.
However, doubts remain over the likelihood of the European Central Bank (ECB) returning to a monetary tightening bias in the coming year.
This helped to limit the losses of the GBP/EUR exchange rate over the course of the week, particularly as Friday’s Eurozone consumer price index data proved mixed.
Markets were not impressed to find that the headline inflation rate had eased from 1.5% to 1.4% on the year in December, signalling another setback to domestic inflation.
As price pressures are failing to build convincingly, the ECB is likely to keep its quantitative easing program in place for longer, to the detriment of EUR exchange rates.
Euro Outlook: EUR Volatility Expected on Latest ECB Meeting Minutes
The Euro is likely to see some volatility as a result of the release of the ECB’s December meeting minutes, with markets keen to gauge the sentiment of policymakers.
If President Mario Draghi and other ECB policymakers continued to express dovishness the GBP/EUR exchange rate could rally sharply.
Even if the central bank demonstrates confidence in the domestic outlook this is unlikely to be enough to boost the single currency at this juncture.
Focus will also fall on the German gross domestic product for 2017, which is expected to show that the Eurozone’s powerhouse economy accelerated further in the last year.
Another robust GDP figure could limit any Euro weakness, at least in the short term.
10:00 Eurozone Retail Sales
07:00 German Trade Balance
10:00 Eurozone Unemployment Rate
09:00 German Gross Domestic Product
12:30 European Central Bank Meeting Minutes
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