Euro Rises in ECB Meeting Aftermath

The euro has continued its appreciation against the US dollar yesterday, following the seismic announcements by the European Central Bank (ECB), after its Governing Council meeting.

Since the release of the raft of ECB measures to combat the deflationary slide in the euro area, the euro rose to over  $1.10, and has stayed over that threshold.

Currently, the euro is buying $1.11, a significant hike from purchasing just under $1.085 in the early hours of yesterday afternoon. The euro has reached its highest peak against the greenback in a month.

Investors will be short squeezing their euro stocks, as the currency in likely to weaken in the face of the ECB increasing the amount of quantitative easing by EUR 20 billion per month to EUR 80 billion, with corporate bonds now added to the list of assets that can be purchased.

And additionally,  the lower forecast for euro area GDP that was reduced to 1.4% from 1.7% for this year.

The ECB inflation targets are also lower than their 2% target, with their estimates that prices would increase by 0.1% this year, and 1.3% for 2017.

Daniel Wray, an analyst with FC Exchange, opined that if the ECB did not take action in such a strong manor and spaced out the move taken yesterday across a number of meetings, whilst at the same time giving forward guidance around what was to come, investors were suspicious that the EUR/USD rate would have crashed.

Investors have also been airing their concerns, around the fact that Draghi “has fired the big bazooka.”

They are worried the central bank has run out of ammunition. It is widely felt that yesterday’s actions truly reflect the depth of the ECB’s concerns about the global economy.

Meanwhile, the UK pound has begun the day against the US dollar, buying just under $1.43, and is currently buying that rate, having leapt up slightly so far GMT. 

German Consumer Prices Unchanged Year on Year 

The Federal Statistical Office have revealed that consumer prices have remained unchanged for February, compared to the same month a year ago.

The inflation rate was 0%, which is a decline from January where inflation was 0.5%.

Energy prices have been the main cause of a slide in prices in Germany, a pattern that has emerged since July 2014.

For February energy costs fell by 8.5%, a figure that was an increase in the velocity of prices reducing in this sector.

Heating oil fell by a staggering 33.6% in February year on year, with motor fuels also significantly declining by 11%.

Food prices reversed the trend on consumer prices, as they rose by 0.8% in February, in contrast to the same month for 2015.

Compared with the overall inflation rate, the prices of services in total climbed above average, rising to 0.9%. 

Inflation in Spain Falls by 0.8% 

In keeping with the current deflationary trends in the euro area, as their consumer price index declined by 0.8% in February, which was five tenths lower than what was recorded the previous month.

Whereas the Harmonised Index of Consumer Prices, decreased in the same month by 1%, a reduction of six tenths month on month.