Eurozone Inflation

The Euro shrugged off an anticipated pickup in inflation during October, remaining on its back foot in the mid-week session, as global factors and concerns about a darkening economic outlook weighed on the single currency. 

The Euro weakened in the final session of the week as traders responded to negative developments in the Italian budget process and a surprise fall in the rate of core-inflation for the Eurozone that have placed a question mark over the European Central Bank (ECB) monetary policy outlook. 

The Euro pared gains a touch Friday after official data revealed a surprise fall in both measures of Eurozone inflation for August, denting the single currency's lead over rivals on a morning when markets are also wrestling with President Donald Trump's latest attack on the single currency and European Union.

The final revision to Eurozone March inflation delivered a surprise to markets on Wednesday, April 18 after Eurostat announced a downgrade to annualised numbers.

Eurozone inflation data for the month of January is out at 10:00 GMT, and any surprises here could move the Euro.

With growth at multi-year highs, expectations of a complete end to quantitative easing are mounting, but changes in inflation and wages will be paramount for ECB monetary policy in 2018.

For the single currency, all eyes will be on the release of inflation data at 10:00 GMT.

Tuesday’s data follows closely on the heels of October’s ECB monetary policy announcement and may vindicate the central bank for its cautious approach to winding down its quantitative easing (bond buying) program.

Inflation data out of the UK and Eurozone will form the economic focus for the Pound-to-Euro exchange rate on Tuesday, October 17.

“Given still-flat positioning, the weak USD and the focus of FX investors on the timing of the ECB’s QE taper, we would expect a bigger move in the EUR in the event of a hotter than-expected core reading.”

This morning's release confirms that Eurozone inflation continues to trundle along at a low level despite the widespread economic recovery in the region.

A huge inflation-themed headache lies ahead for policy-makers at the European Central Bank (ECB) who are likely to preside over Eurozone inflation falling well below their 2% target over coming months.

On all counts, inflation is moving in the opposite direction to where policy-makers at the ECB would like and this could weigh on the Euro going forward.

The Euro outperformed its major rivals following the release of data that showed a key measure of prices in the Eurozone was riding steadily towards the ECB's target level.

The Euro was little changed on Wednesday with the Euro Index showing a slight gain of 0.04% against a basket of currencies.

The Euro weakened against the pound on Monday after the release of steady but unspectacular inflation data kept alive the prospect of the European Central Bank (ECB) having to keep stimulus efforts active.

Prices stalled in the Eurozone in August, showing that not all the continent’s bad times are necessarily behind it...