The euro is facing selling pressures after a series of comments were heard over the weekend from various central bank officials and politicians calling for the European Central Bank to increase monetary stimulus. The only economic data on the eurozone agenda is industrial output, which is forecast to rise, but given the disappointing figures released last week in France and Italy, downside surprises are more likely. This will not benefit the euro and could give momentum to euro selling pressure. Another significant development was the rise in geopolitical tensions over the weekend. The events in the Ukraine have given fresh momentum to franc gains as foreign investors seek the safety of the currency. The franc is close to reaching this year’s highs against the euro. US economic data is expected to show demand from consumers picking up. Strong retail sales data could give the dollar more room to make gains against the euro.

Sterling

Sterling has taken back some of its Friday’s losses against the euro, but gains from here could be slow coming. The release of BRC retail sales could help give the pound a lift, but gains may prove challenging given the CPI figures that are on the agenda. The consumer price figures are expected to continuing slipping after hitting four-year lows last month. Weak price pressures argue in favour of loose monetary policy. Sterling has also dropped back down from near four-year highs against the US dollar.

US dollar

Equity markets continued to see declines on the back of weak corporate earnings data and those reports are just getting started. Several big US banks are scheduled to release Q1 earning reports, which could help drive sentiment. PPI data released last week should have been dollar supportive, but the dollar has only been able to see some advances over the weekend as the central bank in Europe beefs up its rhetoric on easing monetary policy.

Euro

European Central Bank President Mario Dragi stated that if the Euro keeps strengthening, the ECB will ease monetary policy. Board member Coeure, said that the ECB is ready to make asset purchases, while Noyer said that the weakening of the euro was desirable. The stronger euro is preventing the return of inflation to its 2 per cent target. From the comments heard over the weekend, it has become clear that the central bank is getting closer to act on its threat to embark upon a Quantitative Easing programme.

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