The Euro continued to rally while making its third monthly gain following reports which revealed that inflation increased faster than economists were anticipating in November, fueling speculation that the ECB may not change stimulus.
Euro Heads For Best Month
The 17-nation currency was set to sustain its biggest advance since April against the Yen subsequent to the release of economic data which showed that inflation for the region’s biggest economy rose more than predicted. Germany announced that inflation quickened to 1.6 percent in November, after posting at 1.2 percent the previous month. The markets have grown weary of disinflation pressures that have built in the E.U. over the past months, and the news out of Germany offered some relief. Other reports indicated that inflation in the Euro-zone surged from a four-year low of 0.7 to 0.9 percent, surpassing estimates for a 0.8 percent advance. The E.U. announced that the unemployment rate went down from 12.2 to 12.1 percent in October. In France, consumer spending dropped 0.2 percent in October, missing forecasts for a 0.2 percent rise. The numbers bolstered speculation that the European Central Bank may refrain from expanding the monetary easing program for now.
Yen Weakens Further
The Yen continued to spiral to the downside on Friday against the U.S. Dollar despite releases confirming that consumer prices climbed the most in close to 15 years, thereby reducing appeal for the harbor currency. The Bank of Japan has been purchasing 7 trillion Yen in government assets per month in an effort to reach its 2 percent inflation target, and it appears that Japan is emerging from deflation. Other reports denoted that household spending in Japan climbed at an annual rate of 0.9 percent in the month of October, just as analysts had predicted, subsequent to a 3.7 percent hike one month prior. Additional economic calendar reports showed that Tokyo’s core consumer inflation, which does not include volatile items like fuel or food, went up at an annual rate of 0.6 percent in November, beating forecasts for a 0.4 percent jump. The Yen remained under pressure on speculation that the central bank may increase stimulus in the months to come in order to hit its 2 percent inflation target of by April of 2015. In the past week, bank board member Sayuri Shirai commented that she has serious doubts over whether the bank will attain its goals given the downside risks the economy is currently facing. She added that policy makers will take steps to maintain progress.