The euro has plunged from near two-year highs to a six-week low against the US dollar after weak inflation figures stoked fears about demand in the 17-member economy.

The US dollar is looking stronger against a number of its main trading partners but may face a difficult end to the week as investors prepare for third quarter US GDP data followed by October’s delayed US non-farm payrolls data. Both reports may show weaker economic activity which should weigh on the US dollar.

The British pound could take a back seat to euro/US dollar movements but the UK data calendar will give traders plenty to consider. It may be a mixed few sessions for sterling, with UK services report expected to show a slightly slower rate of growth followed by British factory data that may show a strong rebound.

Sterling

Sterling is trading at 2½-week lows against the US dollar and could be in danger of slipping towards September troughs if upcoming data implies that the Bank of England will keep its monetary policy loose for some time yet. The BoE will announce its latest decision on interest rates and quantitative easing but is not expected to make any changes. The pound is under pressure after a PMI survey on UK manufacturing missed expectations.

US dollar

US ISM manufacturing index beat forecasts, showing a faster rate of growth in October which added to cautious bets that the Federal Reserve could still begin tapering its monetary easing programme as soon as December. But a large portion of the US dollar’s gains have come via the help of a fast-falling euro. The single currency suffered heavy losses after a big drop in euro zone inflation prompted talk of an interest rates cut by the European Central Bank at its meeting this week.

Euro

The euro is down by almost 3 per cent against the US dollar compared to the near 2-year highs the single currency traded at on October 25th, starting a session at a six-week low amid concerns the European Central Bank will announce a change to monetary policy. Data showed inflation in the euro zone slowed from 1.1 per cent to an increase of just 0.7 per cent year-on-year in October, which was the weakest pace since November 2009.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.