Eurozone Inflation Dangerously Low

The euro sunk on Tuesday after the region's inflation data surprised markets on Monday and fueled growing speculation that the European Central Bank would ease further at its policy meeting on Thursday. The common currency traded at $1.3775 at 6:45 GMT on Tuesday morning.

reported that annual consumer inflation was down to 0.5 percent in March, its lowest level since November 2009. The figure was below February's 0.7 percent and even lower than analysts' pessimistic outlook of 0.6 percent. Even more concerning, the bloc's inflation is far below the ECB's two percent target. Such low inflation numbers are worrisome as the region has only recently begun to pull itself out of a record long recession. Many are beginning to worry that the region could sink into a period of deflation similar to Japan in the early 90's if the bank doesn't step in. The ECB said that inflation below 1 percent was considered a “danger zone”, and now the bloc has been in that zone for six months in a row. In recent weeks ECB members have hinted that the bank is considering using non-traditional policy measures at this week's meeting such as an asset purchase program or a negative deposit rate. However, many believe the bank could still hold out on intervening. The bank has been extremely tolerant of low inflation over the past few months and surprised investors by keeping its interest rate constant at its March meeting. With the Easter holidays coming up, and travel and hotel prices set to rise, the bank could wait until June to act.