Euro Deflation

The economic forum in Davos continued over the weekend and while there were several speaches of note anyone with a Euro currency requirement would have been interested to hear head of the International Monetary Fund (IMF) Christine Lagarde stated that the Eurozone inflation is well below their target level and that the threat of deflation in the single currency economy was very real. Deflation is when the price of goods and services falls and as a result this can hinder growth and cause long lasting economic problems. However, at the same time head of the European Central Bank (ECB) Mario Draghi stated that they were ready to act should inflation continue to fall but he also insisted that that deflation was not currently an issue but that inflation will remain low for the next two years. So, while the UK is seeing unemployment fall and inflation remain around target the Eurozone has high unemployment and is closing in on deflation which to me indicates that Sterling is likely to be in a better position over the course of this year and so could mean we see the recent Sterling Euro trend continue.

The Week Ahead – Currency Exchange Rates

Today is a quiet day for economic data with US new home sales the main data set of note. However, tomorrow sees the announcement of UK Gross Domestic Product (GDP) figures for quarter 4 of last year and is expected to show the UK economy at 0.8% growth with annual growth up at around 2.8% which would be yet more strong data for Sterling. Also out tomorrow was US durable goods order which is expected to show a large drop which may cause some USD weakness. There is more major USD economic data on Wednesday with the FED interest rate decision which will be Ben Bernanke’s last of his tenure and so is likely to not bring any major shocks. Following the USĀ announcementĀ comes the New Zealand interest rate decision, again unlikely to see any major changes with rates at 2.5%.

On Thursday we have European consumer confidence, UK mortgage supplies and US GDP all of which could have a big impact on their respective currencies. Friday is a quieter day but we still have European inflation figures, something that is currently a hot topic for the economy.

There is clearly a lot of key economic data due for release this week and so anyone with a currency requirement should stay in close contact with us here at Foreign Currency Direct plc so we can discuss your currency requirements and the different options available to you.

So, if you need to buy Euros and would like to discuss the current rates of exchange and the market outlook please give one of our experienced currency brokers a call today. You can call straight through to our trading floor for free on 0800 328 5884 or if calling from abroad 0044 1494 725353 alternatively you can email me directly on trh@currencies.co.uk