The Euro remains under pressure and is trading close to its recently struck 9-year trough versus the U.S. Dollar as oil prices continue to fall and the threat of deflation looms large. Eurostat earlier reported that annual inflation fell again in December, this time to -0.2% against expectations of a drop to -0.1%. There was, however, a slight and unexpected improvement in core inflation data which excludes volatile components like energy and food; core inflation improved to 0.8% from November’s 0.7%. Despite the improvement in core inflation, the European Central Bank’s Mario Draghi is still likely to feel he is caught between a rock and a hard place and the possibility of imminent full scale QE could be on the table at the ECB’s next monetary policy meeting which takes place later this month.
As reported at 8:59 a.m. (GMT) in London, the EUR/USD was trading at $1.1865, a loss of 0.2% in the session; the pair has been trading closer to the low end of the range and is currently only a pip from the session low at $1.1842. The EUR/JPY pair is trading higher at 141.0495 Yen.
Greece Plays a Role
What will be a key factor in the ECB’s decision making process is the outcome of a snap election in Greece. Those uncertainties will continue to impact the Euro, especially if the Syriza party wins the election as officials of the party have said that they would cancel several of the austerity measures that have been put in place as terms and conditions of the Greek bailouts.