Euro to US Dollar exchange rate Falls on German Inflation Data

November 27, 2014 - Written by Minesh Chaudhari

STORY LINK Euro to US Dollar exchange rate Falls on German Inflation Data

Currency News Uk brings you the latest Euro (currency:EUR) to US Dollar (currency:USD) exchaneg rate forecast

The Euro weakened against the US Dollar and other major peers due to data showing that inflation in Germany (the Eurozone’s largest economy) slowed to its weakest level in close to five years, inflation also fell in Spain adding to concerns over deflation.

According to the Wiesbaden based Federal Statistics Office, the inflation rate in Germany slowed to a near five-year low as consumer prices rose by just 0.6% in November on an annual basis, a figure that was below economist forecasts for a rise of 0.8%. On a month on month basis, prices remained flat.

Earlier in the session, a report showed that Germany was enjoying record low unemployment even as inflation weakens. Data released in Spain meanwhile showed that the nation fell deeper into deflation this month.

Other data also showed sentiment across the Eurozone improved unexpectedly in a sign that the European Central Bank’s attempts to improve growth and confidence across the currency bloc are starting to be noticed by consumers and businesses. Despite that, the markets remain doubtful over the region’s economic strength.

‘With inflation set to remain far below target in the Eurozone’s largest and arguably strongest economy, the ECB will remain under intense pressure to provide more policy support. Continued weakness in the energy component will probably push headline inflation down further in the coming months,’ said Jennifer McKeown, senior economist at Capital economist.

More Weakness Forecast for Euro Exchange Rate

More weakness is expected for the Euro as economists increased their bets that the latest Eurozone inflation data will showed that inflation will decline to a rate of 0.3% this month to match the lowest level seen since 2009. The inflation rate remains deep in what the ECB calls the danger zone and well below its target of just under 2%.

As well as the inflation data a report on unemployment is also due to be released.

Also putting pressure upon the single currency were comments made on Wednesday by ECB Vice President Vitor Constancio who said that the bank could introduce a quantitative easing programme in the first quarter of 2015.

The Euro to US Dollar exchange rate is expected to remain under pressure for the remainder of the week as the US markets are closed for the Thanksgiving Holiday.

Against the Pound, the Euro firmed despite the poor data as economists took advantage of a lack of UK data and light trading to take profits ahead of the weekend and the end of the month.

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