This morning saw the euro plummet as comments from Benoit Coeure an executive member of the European Central Bank, suggested the bank could be ready to “front load” its current quantitative easing program. The Euro sank to 1.1173 against the dollar from 1.1314. As a result the European stock markets rose sharply amid the comments by the bank to increase the pace of its 1 trillion euro bond-buying campaign, due to lower market liquidity in high summer.
It has been a good time for world stocks recently with record highs on Wall Street and another rise in Chinese stocks.
With this outlook and the continuing talks between Greece and its creditors, and the on going fears of bankruptcy and a “Grexit” from the Eurozone. I feel that we could see continued Euro weakness in the near term.
Other data released today included core consumer price index (YoY) and producer price index (YoY) for the UK. Surprisingly consumer prices dropped below zero for the first time since 1960, as food and energy prices fell further spelling good news for family household budgets.
With a decline of 0.1% in April the same time the previous year, an expected figure of 0% and way below the Bank of England’s 2% target may add to fears of deflation. Core inflation also fell to 0.8% the lowest its has been since 2001 missing a consensus of 1%. The sterling declined 0.7 percent at $1.5547. Added to this producer prices (YoY) were also down 1.7% from the same time last year with input prices up for the month but down from the previous year by 11.7%. Crude oil being the reason behind the annual drop.
By Sonny Hammond