Euro drops on weak inflation data

Published: 3 Feb at 8 AM Tags: Euro, Dollar,

The euro has dropped to its lowest level against the dollar in nearly ten weeks as analysts watch to see if the European Central Bank will introduce measures to combat deflation. Investors are shying away from riskier assets, a move that is creating support for the safe-haven yen.

The euro is currently trading at $1.3489 after hitting $1.3479 on Friday, the weakest the single currency has been since the end of last November. The euro is also down to an eight-week low against the yen to 137.38. Friday’s eurozone inflation data showed an easing to 0.7 per cent in January compared to the same month a year ago. Analysts had been expecting an increase to 0.9 per cent compared to December’s 0.8 per cent.

The ECB is due to meet on Thursday when it could announce an easing of monetary policy as a way of staving off deflation. Inflation is expected to slow even further over the next month.

In the US economic figures relating to consumption have remained relatively robust meaning the Federal Reserve is likely to continue to push ahead with the reduction of its stimulus programme.

The dollar is currently up 0.3 per cent against the yen to 102.34. Solid manufacturing data from the Institute for Supply Management later today could see the dollar gain further.