Euro Exchange Rate: Inflation Data Improves but Constancio Talks EUR Lower
The euro was hoping for a boost from today's inflation numbers - but even a beat on expectations was unable to guarantee the shared currency a solid start to the week.
The Euro remains inverted to the dollar and one feels that should recent lows be exceeded further weakness towards, and ultimately below, the March 2015 lows should be seen.
The strength of the trend was confirmed by a complete disregard for what should have been a strong data set for the shared currency. Inflation read at 0.1% in October, ahead of forecasts for 0%. While not a massive surprise it would typically have been expected to provide upside.
The EUR/GBP exchange rate is now seen trading at 0.7054 - above the support level of 0.7043 which is proving and incredibly tough level for the British pound to crack. But as we mentioned should we see it break a fall to March lows becomes highly likely.
As noted here, the formation of a double-bottom on the charts, when combined with this solid support zone, opens up the potential for a strong EUR rebound should data go the euro's way.
The euro to dollar exchange rate is meanwhile seen at 1.0724 - the period of consolidation for the EURUSD conversion is still technically in play but we get the sense that a break-out is approaching.
Only when this support zone breaks in EURUSD will we watch for a faster decline to 1.0450 - CitiFX are betting that this is an achievable target for the dollar to test in coming days and weeks.
Latest Pound/Euro Exchange Rates
  | Live: 1.1391▼ -0.13%12 Month Best:1.2162 |
*Your Bank's Retail Rate
| 1.1004 - 1.1049 |
**Independent Specialist | 1.1232 - 1.1277 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Constancio Talks the Euro Lower
The most likely culprit behind Monday's decline in the euro is ECB governing member Vitor Constancio who appears to have stolen attention away from the inflation data by actually talking about inflation!
In short, Constancio has continued the recent trend of ECB members warning that December may see the Bank cut interest rates - a highly negative scenario for the euro at the moment.
Constancio said he remains concerned about the slowdown in emerging markets which could see inflation fall further.
In his opinion monetary policy will remain accomodative and further monetary policy options are available if needed (read potential rate cuts).
Constancio believes that the ECB will only be able to take inflation closer to its 2% target by 2017.
Eurozone Growth Stats Keep Euro Rates Subdued
By all accounts, this has been a poor week for the EUR.
European Central Bank (ECB) President Mario Draghi has not helped the currency with his continued dovish comments, which seem to be in favour of the ECB broadening its quantitative easing programme, and his willingness to use “all available instruments” to boost the eurozone’s economy.
On the data front, figures released by Eurostat, the EU’s statistics agency, showed lost momentum for the eruozone’s economy in the third quarter. From July to September, the Eurostat reported the EU GDP expanded by 0.3%, below the forecasted 0.4%.
Despite global conditions that should have been favourable to the eurozone, such as weak inflation and cheaper oil, growth has been stunted, only staying within a narrow range. In addition, other emerging markets and China’s economic stresses are not helping – encouraging stronger expectations for an ECB intervention.
This subdued EU growth pace, the recent political instability in Portugal, Brexit and Greece’s ongoing economic upheaval continue to exert downward pressure on the weakened currency.
