The Euro tumbled to its lowest level of 2014 so far on Friday after better than forecast Canadian retail sales and inflation data boosted the ‘Loonie’.
The single currency was weakened early on in Friday’s session by the release of official data which showed that German producer price inflation slipped by 0.2% last month, a worse fall than the expected rise of 0.2%. The weaker rate adds to the fall of 0.1% seen in April and added to concerns over deflation in the Eurozone.
An International Monetary Fund report also weighed upon the Euro as it said that the European Central Bank should introduce quantitative easing in order to weaken the currency and restore confidence to the region.
The Canadian Dollar exchange rate surged against the Euro, Pound, US Dollar and other major peers after a report released by statistics Canada showed that the nation’s inflation rate advanced to a five-month high and exceeded the Canadian Central Banks inflation target of 2% for the first time in two years.
“Core inflation is now running a full half-point above the bank’s estimate for the quarter, although we still believe any move in policy is a year off,” said Peter Buchanan of CIBC World Markets.
The ‘Loonie’ was also buoyed by the release of retail sales data which showed that sales rose faster than economists had forecast in April. Retail slaes climbed by 2.4%, smashing forecasts for a rise of 1%. Motor vehicle sales led the way.
Following the release of the data the Canadian exchange rate jumped against the Euro and other major peers.
“The low inflation ship has sailed. While both core and headline inflation have been pumped up by the early-year slide in the Canadian Dollar, there is more than just food, fuel and the currency at play. “Given that core inflation remains below target, the bank will feel no urgency to respond to the upswing – after a long spell below 2 per cent, policy makers will readily tolerate a spell above 2 per cent for headline inflation. However, clearly the tone of the bank’s rhetoric will change, and change significantly in next month’s monetary policy report,” said Bank of Montreal cheif economist Douglas Porter.
The Euro could recover some ground if today’s consumer confidence report comes in positively. Economists are expecting confidence to have improved slightly from May’s figure of -7.1 to -6.5. With events in Ukraine and Iraq and fairly weak domestic data releases however we could see confidence fall.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3568 ,
Euro,,British Pound,0.797- ,
Euro,,Australian Dollar,1.4455 ,
Euro,,Canadian Dollar,1.4602 ,