Euro Falls to 8 Month Low

The euro hit an eight-month trough against the dollar on Wednesday and German bond yields were at record lows ahead of inflation data expected to boost the case for further European Central Bank policy easing.

Investors were also awaiting a statement from the Federal Reserve following its policy meeting that some expect to signal a more hawkish policy outlook, and data likely to show the U.S. economy bouncing back strongly in the second quarter.

European shares dipped after French oil major Total (TOTF.PA) was hit by concerns over its investments in Russia following Tuesday’s tightening of European sanctions on Moscow after the downing of an airliner in neighboring Ukraine.

 
The euro fell to $1.3395, its lowest since November 2013, before recovering to $1.3400, down around 0.1 percent on the day after data showing Spanish consumer prices fell 0.3 percent in July from a year before.

The surprisingly big fall came even though figures released at the same time showed Spanish economic growth hit its fastest since before the financial crisis in the second quarter.

Traders said that if German inflation data, due at 1200 GMT, also came in below forecast, it would intensify pressure on the ECB to print money to support growth and avert deflation risks.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza