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Euro Deflationary Pressures

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The simmering concerns in Eastern Europe remains a key determinant of the trend in currency markets. Although geopolitical risks emanating from Eastern Europe pose serious challenges to the common currency bloc, the Euro continues to post modest gains against the US Dollar in today’s trading session, as the recent set of economic releases exude confidence that the region’s economic recovery is gathering momentum.

However, the recent rally in the single currency appears to have ruffled a few feathers in the ECB, given its broader implications on prices in the Euro zone. With the Euro zone economy staring at the prospect of sliding into a deflationary environment, there is a growing belief that the ECB will adopt unconventional measures to guard against the threat of deflation. Against this backdrop, the German and Euro zone consumer price inflation data due this week are likely to have a considerable influence on determining the trend in the Euro going forward. With no major economic releases scheduled today, traders are likely to position themselves for crucial events lined up for the week from both sides of the Atlantic.

Key Economic Events

  • UK Markit Services PMI
  • UK Official Reserves
  • US Trade Balance
  • US IBD/TIPP Economic Optimism
  • US FOMC Member Stein Speech
  • Eurozone Markit Services PMI
  • Eurozone Markit Composite PMI
  • Eurozone Retail Sales
  • Eurozone EcoFin Meeting
  • Spain Unemployment Change