Euro Stronger On Hopes For Better Inflation Data

The euro gained some ground on early on Tuesday due to rising tension in Ukraine coupled with expectations of better inflation figures.  The common currency was steady at $1.3862 at 4:45 GMT after reaching a near two-week high against the dollar on Monday.

Reuters reported that the US implemented more economic sanctions against Russian government officials and companies with a link to Vladimir Putin on Monday in response to Moscow’s unwillingness to backtrack on its actions in Ukraine.  The euro benefitted from the rising tension as investors saw the common currency as easier to obtain than dollars, which some fear could be subjected to sanctions if things continue to worsen.

However, the euro is still under some pressure from ongoing rhetoric from European Central Bank officials who have been suggesting that the bank will use monetary policy to keep the exchange rate from further depressing inflation. The bloc’s March inflation was unsettling at 0.5 percent, causing many to worry that the region could slip into a period of deflation. Despite that, the bank chose not to act, saying more data would be needed before the decision to ease further would be made.

On Monday, ECB governing council member Christian Noyer said that the currency’s strength is weighing down prices, but that he didn’t see the region entering a period of deflation. Moving forward, investors will be watching for the bloc’s April inflation data, set to be released on Wednesday. The figures are expected to show a slight increase from last month’s number, which will take some of the pressure off of the ECB.