Euro drops on inflation slowdown

Published: 1 Nov at 9 AM Tags: Euro, Dollar,

The euro dropped overnight to its lowest level in a fortnight after an unexpected inflation slowdown was announced. Analysts are now looking to see whether the European Central Bank will move to bolster the economy. During October inflation fell to 0.7 per cent, a four-year low, and well below the 1.1 per cent forecast and the 2 per cent ECB target.

The euro was last down 0.3 per cent to $1.3554 after hitting a low of $1.35385. The single currency it likely to remain under pressure until the ECB meets at the end of next week. Other data coming out of the euro showed record high unemployment through September.

The euro also hit a two-week trough against the yen at 132.985 yen. The euro’s troubles pushed the dollar index up to 80.418 after it last week plumbed a nine-month low of 78.998. The dollar dropped against the yen by 0.2 per cent to 98.14 yen.

Although most experts don’t expect the Federal Reserve to ease its monetary stimulus programme until March next year, US economic data has been broadly positive. Business activity is up and unemployment figures are down.

Positive figures coming out of China have helped to support the Australian dollar. The Aussie is currently trading at $0.9460 after hitting a low of $0.9440 on Wednesday.