The Euro has weakened against the Pound and the majority of its most traded peers after data released on Friday caused economists to raise their bets that the European Central Bank will have to take action to stave off deflation in the Eurozone.
A report released by the European Union’s Statistics office based in Luxembourg showed that inflation across the single currency bloc remained well below the ECB’s target of 2%. Consumer prices rose by an annual 0.7%, less than December’s figure of 0.8%. Worries were raised as the data is the fourth consecutive month where inflation has been below 1%. The weak inflation rate piles pressure back onto the ECB to take action at its next policy meeting.
“While the growth outlook is improving for the currency bloc, the ongoing problems in the banking sector, which are manifested through ongoing credit contraction, will continue to act as a drag on both growth and inflation, this will put renewed pressure to act on the ECB,” said an economist at BNP Paribas.
Although ECB President Mario Draghi said in January that deflation was not threatening the euro zone, a number of countries are already suffering deflation and the International Monetary Fund warned deflation was a potential risk. Today’s report will pile on the pressure for some sort of action to be taken.
Unemployment data also painted a negative picture for the region. Despite signs of a recovery the number of Europeans out of work stayed close to a record high. It ticked down from 12.1% to 12%. Unemployment for Germany is at 5.1%, France 10.8%, Italy 12.7% and Spain at 25.8%.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3538 ,
Euro,,British Pound,0.8228 ,
Euro,,Australian Dollar,1.5492 ,
Euro,,New Zealand Dollar,1.6628 ,
[/table]
