Market Overview

European Commission Report Boosts Common Currency

European Commission Report Boosts Common Currency

The euro made its way above $1.39 on Tuesday following positive comments from the European Commission.

The common currency traded at $1.3922 at 8:00 GMT as worries about deflation in the bloc dissipated.

According to Reuters, the European Commission said that the possibility of the eurozone slipping into a period of deflation is very low despite the region's recently low inflation figures.

In a forecast released on Monday, the European Commission said it saw consumer inflation at 0.8 percent in 2014 and 1.2 percent in 2015. The figures fall below the European Central Bank's two percent target, but indicate that inflation will slowly rise as the region's recovery picks up speed.

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The commission warned that factors like government spending cuts and high unemployment were keeping consumer prices depressed, and said that inflation could fall lower than expected if economic conditions deteriorate.

Nevertheless, the bank doesn't see deflation as a risk even in the worst case scenario.

The news helped prop up the euro ahead of the European Central Bank meeting, set for Thursday.

Although bank President Mario Draghi warned that the bank would take the common currency's strength into consideration when making policy decisions, most are not expecting the bank to make any policy changes at this meeting.

However, most believe the bank will be forced to act in the future as inflation is so far below the bank's target.

The ECB has said it is prepared to use unconventional measures to combat the bloc's falling inflation, which has many expecting to see some type of quantitative easing program in the near future.

Posted-In: News Eurozone Commodities Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga


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