Forex snapshot

Continuing with last week’s theme the euro is off against the US dollar after Spain shows signs of deflation. Meanwhile, sterling continues to slide as the US dollar dominates.

Euro and dollar currency
Source: Bloomberg

Euro hit by Spanish CPI

The euro is trading at $1.2696. The single currency dipped below the $1.27 mark on Friday evening and remained under the handle in overnight trading. This morning, Madrid announced that CPI slipped by 0.2% in September, adding to Mario Draghi’s worries about deflation. The Spanish economy is deemed to be in the second tier of eurozone economies so its influence in the overall currency region is large. Tomorrow, the eurozone CPI data will be announced and the consensus is for a reading of 0.3%.

The euro has lost so much ground to the US dollar but if the CPI report matches or exceeds estimates the euro could pull back to $1.2733. However, weak inflation figures could drive the euro to $1.26.

Dollar continues to dampen pound

The pound is trading at $1.6238. The move in the currency pair over the past week has been more to do with the US dollar rather than the soft pound. We are drawing nearer the end of the US quantitative easing scheme and a number of statements from Federal Reserve members over the last weeks have put traders in the mind-set that the US will raise rates ahead of the UK. Tomorrow, the UK will report the final GDP reading for the second-quarter. Traders are expecting a reading of 0.8% and soft growth figures could drive the pound to $1.6178.

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