The latest Consumer Price Index data was released this morning and as expected showed that the Eurozone inflation level continues to remain weak. There is forecast for a slight decrease in the core figure from 1.2% to 1.1%, was exceeded with the final figure being a dropped of a further 0.1% to a flat 1.0%.
There has been a major issue with inflation in the Eurozone as the huge sums of Quantitative Easing (QE) had all but stopped inflation rising. This latest figure means that Eurozone inflation is now at it’s lowest point since late 2016, however as the QE policy begins to be tightened inflation could start to creep up.
The Eurozone is under a slight risk of being left behind with interest rate rises on the cards of several central banks across the globe. Until there is a significant increase of inflation in the Eurozone the European Central Bank are going to be unlikely to make changes.
In his speech yesterday the Chairman of the Federal Reserve Jerome Powell in the United States essentially pointed at multiple US interest rate hikes during 2018. Should that be the case the EU are unable to deliver rate hikes, then money could start to leave the Euro as investors can make larger gains elsewhere.
Tomorrow’s Data that could affect EUR exchange rates
There will also be Unemployment figures and Manufacturing Purchasing Managers Index (PMI) data tomorrow which are both expected to stay the same as the previous reading. Any European data will be keenly watched by investors to provide any further insight into what decision the Central Bank might make.
There is likely to be a focus over the next few months on reducing the Quantitative Easing measures. Mario Draghi has previously suggested that the process would start in April 2018.
Last month Business Confidence fell for the first time in several month as attitude towards risk is maybe starting to change as the conditions are tampered with. The Euro could be moving into a trickier period in the next few months having gained across the second half of 2017.