Euro Strong Despite Poor Inflation Data

Benzinga

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The euro was steady at $1.3854 on Friday morning at 7:00 GMT despite two days of disappointing inflation data.

The common currency surprised analysts and shrugged off the poor data, leading investors to wonder whether or not the European Central Bank will be forced to act in order to lower the exchange rate.

After Germany reported worse than expected inflation figures on Wednesday, most were expecting that the bloc’s inflation report on Thursday would follow suit.

The data was in line with predictions, with the eurozone’s April inflation figure improving only slightly from the 0.5 percent reported in March. Consumer prices were up 0.7 percent annually in April, far below the ECB’s two percent target. Although this news should have been negative for the euro, the currency was largely unaffected.

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Low inflation is a major concern for the eurozone, as the region has reported figures that are dangerously close to zero since the beginning of the year.

Though this week’s lackluster figure was below expectations, many don’t see it being enough to push the ECB to act at next week’s policy meeting. Instead, bets are on for the bank to ease further at its June meeting. For this reason, the euro was able to maintain its strength in the face of the poor data.

Moving forward, investors will be waiting for US jobs data, due out on Friday afternoon. According to Reuters, the report is expected to show that the nation’s economy began the second quarter on a good note, which could drive the dollar higher and put pressure on the euro.

If the April employment figures meet expectations, it will signal that the US’ disappointing jobs data at the beginning of the year was due to bad weather as most policymakers claimed.

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