Deflation Worries Don’t Stop Euro Today

Poor economic data continues to be the norm in the eurozone, but that hasn’t stopped the euro today. Even with concerns about deflation and a stagnant job market, the euro is moving higher today.

Eurostat just released its latest inflation numbers, showing that the annual inflation rate is at 0.5 per cent in May. In April, the rate was 0.7 per cent. This indicates that deflation could become a problem in the 18-nation currency region. Many are looking to the ECB’s interest rate decision tomorrow and looking for looser policy that could spur economic growth and higher prices.
Right now, there is a fear that the low inflation rate, combined with a job market that continues to stagnate, will result in the eurozone slipping back into a state of recession. The ECB hopes that looser monetary policy can combat that.
However, the euro isn’t responding like a currency that could see looser monetary policy. Instead, euro is heading higher today. Some of it is profit taking, and some of it probably because a looser monetary policy has likely been largely priced in.
At 13:38 GMT EUR/USD is up to 1.3636 from the open at 1.3597. EUR/GBP is up to 0.8138 from the open at 0.8120. EUR/JPY is up to 139.6410 from the open at 139.2070.

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