Euro latest: EUR soft on ECB inflation claims despite above-forecast consumer confidence
NEWLY-released consumer confidence data has failed to soothe investor fears that the ECB will stand firm on its ultra-loose monetary policy.
The euro is currently in negative territory versus a number of major currencies.
EUR/GBP has slumped 0.4 per cent to 0.861, while EUR/USD is inching down from opening levels of 1.078.
Losses continue despite the latest data showing better-than-expected consumer confidence scores for the current month.
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Released by the European Commission, the flash estimates for March show that negative feeling amongst consumers in the Eurozone is subsiding at a faster rate than economists expected.
Predicted to rise from -6.2 to -5.7, the Eurozone flash instead climbed to 5, while consumer confidence across the European Union improved from -5.2 to -4.2; in both cases offsetting the fall in sentiment that occurred in February.
The recovery has not cheered investors, however, who see little reason to buy into the euro today following this morning’s mixed messages from the European Central Bank (ECB)’s Economic Bulletin.
Surveys point to a robust growth momentum in the first quarter of 2017
Governing Council members believe that the Eurozone recovery continues to pick up pace and that the positive effects will spread further across the bloc.
The bulletin claims: “Incoming data, notably survey results, have increased the Governing Council’s confidence that the ongoing economic expansion will continue to firm and broaden.
"Surveys point to a robust growth momentum in the first quarter of 2017.”
The outlook on monetary policy remains more muted, however.
Recent inflation data from Germany and the currency bloc as a whole has revealed that the pace of overall price growth has risen near or above the ECB’s target range of just below 2 per cent.
But when volatile energy prices are removed from the equation, inflation remains much more sluggish and ECB policymakers have pointed to this as justification for leaving interest rates in low or negative ranges.
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The latest bulletin suggests the ECB still attributes strong price growth to crude oil volatility, stating: “In contrast to energy inflation, the expected pick-up in (headline) inflation excluding energy and food is likely to be much more gradual."
The ECB said: "There are only weak signs of upward pipeline price pressures.”
Tomorrow’s data could test the ECB’s theory that the Eurozone continues to recover; the day’s Markit purchasing managers indices (PMIs) are largely expected to show a marginal weakening of activity across the service and manufacturing sectors, as well as the overall Eurozone economy.
Finalised French GDP figures for the fourth quarter of 2016 are forecast to be revised higher, however, which might limit the damage caused to the euro by a series of lacklustre business surveys.
