Euro Rate Today: EUR Exchange Rates Undermined by Deflation Fears BUT Gains Seen vs Pound Sterling

Loss continue to come against the US dollar however gains against the British pound are being witnessed with many blaming end-of-month currency flows for the spike lower in EUR/GBP.

Euro rate today - the latest foreign exchange quotes at this article's last update:

• The euro dollar exchange rate (EUR/USD) is 0.05 pct lower at 1.3383.
• The euro pound exchange rate (EUR/GBP) is 0.01 pct higher at 0.7931.
• The euro Aus dollar (EUR/AUD) is 0.06 pct higher at 1.4415.
• The euro Canadian dollar exchange rate (EUR/CAD) is 0.10 pct higher at 1.4620.

Please note that the above quotes are taken from the wholesale markets; your bank will affix a spread to the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more currency in some instances. Find out more.

Deflationary fears keep the Euro under pressure

On the eve of the new month those hoping for a higher euro were dealt a fresh blow when it was confirmed Eurozone inflation is still close to non-existent.

This tells us the economy is nowhere near close enough to performing at full potential raising fears the European Central Bank (ECB) could step in once again.

Chris Towner, Managing Director of advisory services at foreign currency specialists, HiFX says:

"How can you stop a freight train? This is the situation that the European Central Bank finds itself in with inflation continuing to trend lower; similar to the deflationary spiral that Japan was exposed to back in the 1990s.

"Inflation is currently at 0.4% in Europe and the alarm bells which have been ringing throughout this year are now being replaced by evacuation orders. Despite Europe’s fragile recovery, fears of a sovereign default have been replaced by fears that Europe is going to enter a deflationary period by the end of this year.

"Deflation is one of the greatest fears of Central bankers because as soon as consumers expect prices to go lower, they hold off from buying purchases, believing that they will be able to buy more goods for the same amount of money in the future.

“The ECB, which has addressed the situation by cutting rates, now need to look for more substantial weapons in order to fight the deflation enemy.

"Also interesting to note, is that with the UK having halted its QE programme and the US close to exiting theirs, inflation is close to 2% in both of these countries, which is the level deemed to be not too hot or cold.

"The ECB policymakers would love to be in this position and will be working hard behind the scenes wondering how they are going to get there."

Technical forecasts for the euro to pound and euro dollar exchange rate

So where are the next levels for the EUR/GBP and EUR/USD to be found?

Analysts Luc Luyet at Swissquote Research says:

"EUR/USD is in an underlying downtrend. However, monitor the support at 1.3367 implied  by yesterday's intraday bullish reversal (hammer formation). Hourly resistances can be found at 1.3444 (28/07/2014 high) and 1.3485 (24/07/2014 high).

"In the longer term, EUR/USD is in a succession of lower highs and lower lows since May 2014. The downside risk implied by the double-top formation (1.3379) has been met.

"However, another downside risk is given by 1.3210 (second  leg lower after the rebound from 1.3503 to 1.3700). A strong support stands at 1.3296 (07/11/2013 low). A key resistance lies at 1.3549 (21/07/2014 high)."

Regarding the euro to pound, Luyet tells us:

"EUR/GBP remains close to the resistance area defined by the declining channel (around 0.7929) and 0.7940. Another resistance lies at 0.7981 (see also the declining trendline). A break of the initial support at 0.7904 (28/07/2014 low) is  needed to suggest the end of the recent rebound. Another hourly support stands at 0.7874.

"In the longer term, the break of the key support area between 0.8082 (01/01/2013 low) and 0.8065 (05/06/2014 low) opens the way for a full retracement of the rise that started at 0.7755 (23/07/2012 low).

"Another strong support stands at 0.7694 (20/10/2008 low). A break of the resistance at 0.8034 (25/06/2014 high) is needed to suggest some exhaustion in the medium-term selling pressures."