Conflicting Pressures on ECB

If growth fears intensify, then any tough rhetoric from the ECB on inflation will be much less effective in supporting the Euro.

There were weak services-sector PMI readings for Spain, France and Italy on Tuesday even though the figure for the Euro-zone as a whole held steady.

The focus will tend to remain on the ECB this week with the latest council meeting due on Thursday and the bank’s stance on relative risks surrounding growth and inflation will be extremely important for near-term Euro sentiment.

The Euro will remain vulnerable to some further selling pressure if there is evidence of a less restrictive ECB policy. The central bank will still want to maintain a tough stance on inflation and it faces a difficult balancing act. The bank will want to maintain a tough stance on inflation to discourage high wage demands.

The Euro-zone data remained weak on Wednesday with a record drop in retail sales in the year to March while there was also a drop in German factory orders.

Investica
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