Yesterday’s disappointing outcome on German inflation data sent the Euro tumbling broadly and has led to speculation that today’s release of the Euro area figures are likely to also come with a downside surprise. A consensus of analysts had expected inflation to rise to 1.3% in April on a year-over-year basis, but the actual data came in at 1.1%; for the Euro area as a whole, analysts are forecasting a rise to 0.8% from 0.5% but another disappointment would lead to the stronger possibility that the European Central Bank might take action at next week’s policy setting meeting.
As reported at 11:20 a.m. (JST) in Tokyo, the EUR/USD was trading at $1.3810 after having lost 0.3%in Tuesday trade; the EUR/JPY fell 0.2% and was last at 141.73 Yen. The Euro’s retreat was even larger against commodity-linked currencies with the EUR/CAD losing about 1% and the EUR/AUD down 0.4%. The Euro’s general weakness helped to give the U.S. Dollar Index a boost out of the doldrums; the Index measures the greenback’s value against its major rivals and the Euro’s broad decline pushed the Index to 79.814 .DXY, a solid gain after five days of losses.
Central Banks’ Decisions Draw Focus
Markets are now awaiting the Bank of Japan decision as regards monetary policy which is due out momentarily. Analysts believe that the BOJ will maintain its current ultra loose track but won’t hint at any immediate measures. However, as he has done in the past, the BOJ governor is certain to reiterate that the central bank remains committed to adjusting policy as and when needed. Later in the day, markets will refocus their attention on the U.S. where the Federal Reserve will also convey its policy decision and any changes to its QE schedule.