Yesterday hints that the European Central Bank is ‘seriously’ considering introducing negative interest rates to shore up the Eurozone’s economic recovery saw the Euro decline against its major rivals.
However, the Euro recovered ground ahead of the release of growth reports for the currency bloc and its major economies.
The European asset was little affected by German inflation data and the publication of the European Central Bank’s monthly report.
Although the ECB report asserted that inflation is likely to remain below target over the next couple of years the Euro advanced on the US Dollar and trimmed declines against the Pound.
In the opinion of analysts with DBS Group Holding’s Ltd. “The Euro could arrest its recent slide if the improved growth outlook diminishes expectations for the ECB to further ease monetary policy.”
The Eurozone’s economy is expected to have expanded by 0.3 per cent in the fourth quarter of 2013 following growth of 0.1 per cent in the third.
The Euro went on to enjoy its largest gain against the US Dollar for three weeks ahead of the release of US advance retail sales figures.
Concerns that the US report would show stagnation kept pressure on the ‘Greenback’ and after the data was published the US Dollar fell further.
US retail sales actually dropped by 0.4 per cent in January following a revised 0.1 per cent decline in December.
Retail sales excluding autos stagnated rather than edging up by 0.1 per cent as forecast and sales excluding autos and gas fell by 0.2 per cent.
To make matters worse, separate figures showed that initial US jobless claims unexpectedly climbed in the week ending February 8th.
Although these reports are unlikely to prevent the Federal Reserve persisting with its plan to steadily taper stimulus, they might be pushed into trimming bond buying by less than the 10 billion Dollars expected if the US economy doesn’t pick up.
The Euro extended its advance on the US Dollar after the reports were released.
Tomorrow’s Eurozone GDP data is likely to have a considerable impact on the Euro, but the EUR/USD pairing may also be affected by US industrial/manufacturing production reports.
Manufacturing production is predicted to have increased by 0.2 per cent in January, month-on-month, while industrial production rose by 0.3 per cent.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,British Pound,0.8216 ,
Euro,,New Zealand Dollar,1.6394,