Daily FX Analysis Confidence in the Euro-zone outlook was jolted early on Friday by a sharp rise in Italian unemployment to 13.2% for October from 12.9%, maintaining fears surrounding the economic outlook. Although German retail sales data was stronger than expected, there was a sharp decline in French consumer spending and there were further concerns surrounding the Italian outlook with a further contraction in bank lending. The main focus was on the inflation data with the Euro-zone flash rate declining as expected to 0.3% for November from 0.4% while the core rate held steady at 0.7% with energy prices falling sharply. There will be concerns that a further sharp decline in energy prices will put further downward pressure on inflation and could trigger an overall negative rate which would reinforce the downward move in inflation expectations and reinforce a vicious cycle within the Euro area. There will be further speculation that the ECB will take further action at this week’s policy meeting. A low inflation rate had been priced in and the Euro was able to secure a tentative recovery. Trading volumes were inevitably subdued following the US Thanksgiving holiday which continued to erratic trading in New York. There was a further sharp decline in oil prices to five-year lows which undermined wider commodity prices and tended to put further upward pressure on the dollar. There was also evidence of month-end dollar demand which pushed the Euro back below 1.2450. The Euro was able to find some support below 1.2450 on Monday with demand on the crosses providing some protection.
Posted on: Mon, 01 Dec 2014 11:40:31 +0000
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