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Euro to US Dollar (EUR/USD) Exchange Rate weaker on Eurozone inflation worries

European Flags

The Euro fell against the US Dollar on Friday and is set to remain weaker over the course of the weekend as inflation concerns and a stagnant unemployment rate weighed upon the single currency.

The US Dollar in comparison ended January on its best level since 2009 against a number of peers after it found support from positive consumer spending data, demand for safe haven assets in the wake of the emerging market rout and the US Federal Reserve’s decision to further taper its monetary easing programme.

The Euro fell on Friday after a report showed that inflation across the Eurozone (an issue that has caused concerned in the past) came in well below the European Central Bank’s target of 2%. According to the data released by Eurostat, consumer prices rose by an annual amount of 0.7% in January, less than the previous month’s figure of 0.8%.

Concerns about possible deflation – where the price of goods and assets are locked in long-term decline, hitting corporate profits, wage growth, and tempting consumers to delay purchases in the hope of further falls – have grown in recent months

The Euro was also weighed upon by a separate report which showed that the Euro regions unemployment level remained stagnant at 12.1%. Hopes had been raised that the unemployment rate would fall slightly due to signs that a recovery is beginning to take hold.

Looking ahead to the coming week the Euro is likely to see volatility as a number of PMI reports are released.

Key events for the week ahead

Monday 3rd Feb – Eurozone Manufacturing PMI

Tuesday 4th Feb – Italian inflation

Wednesday 5th Feb – Eurozone retail sales

Thursday 6th Feb – ECB interest rate decision