Euro plummets to two year low on the back of weak inflation figures

Claire Hogarth01/Oct/2014Currency Updates

GBP

A mixed day for Sterling saw the UK currency fall on the Dollar and strengthen against the Euro during trading on Tuesday. Positive data emerged from the Office of National Statistics of a point two of a percentage increase in UK Gross Domestic Product to 3.2%. Equally encouragingly for the currency, the quarter on quarter GDP came in marginally higher than expected at 0.9%, again a 0.2% increase on data from August.

In spite of this positive data, Sterling depreciated against the greenback by almost 0.6% in morning trading, although the Pound was able to improve as the day progressed, finishing London trading 0.25% down on the Dollar and 0.2% up on the Euro.

Attention in the UK today will on the release of the Manufacturing PMI data for September which is released at 09:30am London time.

EUR

Yet another bad day for the single currency as the Euro fell to fresh two year lows against the Dollar at midday on Tuesday, after more weak data came out of the Eurozone. While the rate of unemployment in Germany remained unchanged in September, the number of people out of work posted a surprise gain, rising by 12,000, it was revealed yesterday. The Euro initially fell against the greenback by around 0.15% but there was worse to come.

At 9:00am London time the currency went into freefall, plummeting by a further 0.6% within a 45 minute period after Eurostat released its Eurozone inflation figures for September. The YoY Consumer Price Index fell by point one of a percent to 0.3% while the Core CPI, which excludes volatile components such as energy and food prices, decreased from 0.9% to 0.7%, its lowest level in five years. While this decrease was forecast, it now means that inflation is at its lowest level since the height of the global financial crisis with pressure building on the ECB to take more action at upcoming policy meetings.

The Euro ended trading 0.6% down on the USD after recovering late on but has now fallen by 10% since May. More data is to be released for the Eurozone tomorrow as London based Markit Economics announces the Manufacturing PMI for September at 9:00am.

USD

The US Dollar Index surged to yet another four year high of 86.2 on Tuesday before weaker than expected figures on Consumer Confidence saw the currency retreat as the markets closed. Data released by the Conference Board showed confidence that individuals have in economic activity decreased in September to 86.0, substantially lower than the 92.5 Economists had predicted. This was also significantly down on August’s reading of 93.4.

The Institute of Supply Management will today, at 15:00pm London time, release the Manufacturing PMI for the US for September. While a decrease in this figure is predicted, a result of above 50 is expected, which is generally bullish for the US economy.

Rest of the world

Gross Domestic Product in Canada came in lower than expected on Tuesday leading to the Canadian Dollar depreciating by 0.2% against the USD and falling to a six month low in the process. Economic activity registered a flat reading for July of 0%, missing expectations for an expansion of 0.2% and down on June’s 0.3% growth. The currency is now just 0.6% away from registering a five year low against the US Dollar.

The Central Bank of Nigeria was forced to sell Dollars directly to lenders outside of its regular currency auctions yesterday in order to meet demand and stabilise the Naira. The currency declined by as much as 0.8% against the greenback and the Central Bank of Africa’s largest country is keen to avoid this slide continuing.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.