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Euro Strong On Better Than Expected Inflation Data

ByBenzinga
AuthorBenzinga
Published 11/29/2013, 06:33 AM
Updated 05/14/2017, 06:45 AM

The euro looked poised to end the week on a bright note on Friday morning as it traded at $1.3606 at 7:03 GMT.

The common currency was buoyed by inflation data released on Thursday which caused investors to rethink their bets that the European Central Bank would ease further at its meeting next week.

The Wall Street Journal reported that annual inflation data for Germany climbed 1.6 percent in November, up from October's 1.2 percent. Data for Spain showed a 0.3 percent annual increase compared to no change in October. The data was promising as many were on edge about the eurozone's October figures which, at 0.7 percent, came dangerously low to 0.

Moving forward investors will be anxiously awaiting the bloc's inflation figures, forecast to increase to 0.9 percent. Last month, the European Central Bank chose to lower it's key lending rate to 0.25 percent following October's four year low inflation data. Many saw the bank easing further at December's meeting, however better that expected November figures could postpone ECB action.

Although inflation figures may improve, the ECB announced on Thursday that private sector lending within the bloc fell 2.1 percent in October from the previous year's figure. Eurozone banks' unwillingness to lend due to the risky economic backdrop has been a strain on the the bloc's already fragile recovery. Despite ECB efforts to provide relief to banks and spur lending, the effects have yet to trickle all the way through the region.

The bank could look to more radical policy changes next week in order to promote lending. Some see the bank taking the deposit rate below 0 percent, effectively charging banks for holding onto excess cash.

BY Laura Brodbeck

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