The euro made its way toward $1.37 on Tuesday morning despite lackluster manufacturing and inflation data. The common currency traded at $1.3691 at 8:20 GMT, near a six week high.
Eurozone inflation data released on Monday showed that the region’s annual rate of inflation remained dangerously low at 0.5 percent in June, far below the European Central Bank’s two percent target and well under one percent, what the bank has called “the danger zone”. The report also included lending data which was equally as disappointing. The figures showed that lending to the private sector declined by 4 billion euros.
On Tuesday, CNBC reported that eurozone manufacturing activity fell to a seven month low in June, though it remained above the 50 point mark which indicates growth. The bloc’s Manufacturing Purchasing Managers’ Index was 51.8 in June, below estimates of 51.9 and down from May’s 52.2 reading.
However the euro mostly shrugged off this data as the dollar dipped this week on fading hopes that the Federal Reserve will raise its interest rates any time soon. On Monday the President of the San Francisco Fed, John Williams, further confirmed speculation saying that the bank will likely maintain its current interest rates for at least a year.
Recent data from the US has raised concern about the stability of the nation’s recovery, leading many to believe that the Fed will be more cautious about tightening. Consumer spending data out this week raised a red flag for many investors as it softened in June, something that could have a significant impact on second quarter GDP. After a difficult first quarter, most expect that the US economy grew in the second quarter, but maybe not by as much as originally estimated.
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