Euro continues its fall, deflation now a possibility


FORBES: The European Union’s currency is now the lowest its been against the dollar since 2006.

Share this article!

FORBES: The European Union’s currency is now the lowest its been against the dollar since 2006.

Investors are only interested in one number and that’s the Euro flash consumer-price index (CPI). Would it fall into negative territory for the first time in five years? And if so, would it bolster market expectations of a more aggressive policy response from the European Central Bank (ECB)? It has and not necessarily so.

As expected, consumer prices fell on an annual basis in December for the first time since the depth of the financial crisis. The headline print came in weaker than forecasted with a reading of -0.2%, year-over-year, compared to expectations for -0.1% and +0.3% in November. The core rate has actually moved higher to +0.8%, year-over-year, compared to +0.7% previously. The results will complicate things a little, but the headline rate is likely to be used to justify ECB initiating quantitative easing (QE) even if much of the decline seems to be attributed to volatile factors.

Read more here.