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Euro Braces for Volatile Week

H.S. Borji
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Euro Braces for Volatile Week

Europe’s common currency was little changed at the end of the week, after surprisingly low German inflation data shone the spotlight back on the European Central Bank. The ECB, which is scheduled to meet for its monthly policy meetings next week, is facing increasing pressure to carve out a response to deflation.

Annual inflation in Germany eased from 1.2 percent to 1 percent in March, preliminary data from the Federal Statistics Office showed today. Slowing inflation in Europe’s largest economy doesn’t bode well for the ECB, which has failed to reassure the markets the currency region would not fall victim to deflation. Euro area inflation has been trending at less than half of the ECB’s target rate for several months.

With little room to adjust interest rates, the ECB is reportedly considering quantitative easing, a more aggressive program that involves central banks buying loans or other assets from banks.

Several batches of Eurozone data are also slated for release next week. Eurozone consumer prices are set to make headlines Monday. Preliminary estimates may show consumer price inflation eased to 0.6 percent annually in March.

Germany and the Eurozone are scheduled to report official employment data Wednesday.

The European Commission will post revised fourth quarter GDP figures Wednesday.

Markit Group will release several headline PMI indicators for Germany and the broader euro area.

Suffice it to say, the euro faces an active and potentially volatile week of trade. Weak consumer inflation data could rock the common currency leading up to ECB rate decision scheduled for Thursday.

In North America’s afternoon session, the EURUSD pair was trading at 1.3750, unchanged from the previous close. The pair bounced from daily low of 1.3705. The EURGBP pair, having declined more than 1.1 percent this week, was trading 0.1 percent lower at 0.8267.

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