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Forex pairs in this Article » EUR/GBP
FXstreet.com (London) - EUR/GBP whipsawed following Eurozone consumer price index numbers, currently down 0.11 percent at GBP0.8304. The numbers highlighted the weak inflation that remains a concern for European policymakers.

Anaemic inflation

Numbers released by Eurostat showed that December Eurozone harmonised consumer price inflation rose 0.8 percent year-on-year, decelerating from 0.8 percent in November. The drop is made more significant given the diminishing effects of falling energy prices – December figures included 0.0 percent energy price inflation, compared with a -1.1 percent in November.

Service price inflation declined to 1.0 percent from 1.4 in November, leaving core Eurozone inflation at 0.7 percent

While the Eurozone has stabilized its volatility, with periphery economies slowly dragging themselves into some semblance of self-determination, the more long-term and inter-linked issues of weak growth, weak inflation, freezing private lending and a strong euro remain. And a core inflation of 0.7 percent puts the Eurozone within touching distance of deflationary territory.

ECB policy options

Thursday’s ECB meeting will likely include some attempted jawboning lower of the euro in an attempt to import some price inflation. While negative deposit rates have been mooted, it is unlikely that the ECB will pursue such a policy just yet, given the inference that the central bank is running out of bullets. But with private loan numbers released on Friday showed a further contraction of 2.3 percent, on top of the October year-on-year drop of 2.1 percent that triggered an ECB cut of its main refinancing rate from 0.5 percent to 0.25 percent – a policy move that did little to thaw European private credit markets.

EUR/GBP to trade on momentum

EUR/GBP is currently trading at GBP0.8304. The pair whipsawed around the Eurozone CPI numbers, spiking to GBP0.8321 before a reversal to GBP0.8305. With little in the way of drivers from the GBP leg scheduled for today, the pair may follow recent bullish EUR/GBP momentum ahead of Thursday’s ECB meet. Tomorrow's European retail sales figures could give some euro support.
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