Market Overview

ECB To Face A Tough Decision At Next Week's Policy Meeting

ECB To Face A Tough Decision At Next Week's Policy Meeting

The euro was steady at $1.3709 on Friday morning at 7:30 GMT as worries about the uncertainty in Ukraine drove investors to safe haven currencies like the Swiss franc.

However, the common currency's near term moves will depend heavily on inflation data due out later on Friday as investors look for clues about the European Central Bank's plans for next week's policy meeting.

The eurozone has been plagued with disappointing inflation data which has sparked worries that the bloc could slip into a period of deflation. The ECB stepped in previously to help combat falling inflation, but this time around opinions are mixed as to whether the bank should lower its key interest rate yet again.

See also: #PreMarket Primer for February 28 - Tension Between Russia and The West Escalates

In a speech on Thursday, German central bank president Jens Weidmann said monetary policy may not be the best way to ensure financial stability in the eurozone. The Wall Street Journal reported that Weidmann advocated for policy changes which would help sure up the region's financial system as a whole, rather than turning immediately to a quick fix from the central bank.

Also on Thursday, Solovenia's central bank chief Boztjan Jazbev was also skeptical about the benefits of another rate cut. Jasbev said the ECB members will explore the possibility, but would need to consider that another rate cut may not be an effective way to solve the region's inflation problems.

February's inflation data will give investors a better idea of what the bank will be facing next week. On Thursday, Germany's flash inflation data came in lower than expected which has left many to speculate that eurozone inflation is not likely to have improved.


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