The euro lost ground on Wednesday as data showing euro zone inflation dipped back into negative territory in September fuelled expectations the European Central Bank will expand or extend its asset purchase programme. Eurostat reported that CPI fell to -0.1% in August, down from 0.1% and against expectations of a decline to 0.
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ECB President Mario Draghi has said the bank stands ready to provide more stimulus for the eurozone. “Nonetheless, weak underlying price pressures will keep total inflation subdued”. “It should be bottom for the year”. “The price of Brent crude oil has dropped around 25% to $49 per barrel since the beginning of May, after it increased from the low of $45.20 on January 13”.
Consumer prices across the single currency bloc slipped to minus 0.1 per cent in the year to September, from 0.1 per cent rise a month earlier, and a steeper fall than economists’ expectations for zero.
The euro weakened for the first time in three days against the dollar after the report. Several sources have noted that the regulator might prolong their asset purchases until mid-2018, expanding the program to 2.4 tln euros, which is nearly twice the now planned volume of assets to be bought.
“Everything is possible”, Mr Hansson said. “The QE program was announced in March, for 19 months, and it has only lasted for six months. Not that things will be radically different at the start of Q4; the timeline for a USA rate-hike is still non-existent, Volkswagen is still only at the beginning of a long and costly scandal, and, most importantly, the Chinese economy is still stalling”, he said. These inflation figures increase pressure on the European Central Bank to take action again.
London’s benchmark FTSE 100 index of top companies jumped 2.31 percent to 6,046.0 points in early afternoon deals.
As Wall Street posted gains topping 1 percent and US Treasury yields rose, the dollar was up 0.30 percent against the yen to just over 120 yen, firmer against the Swiss franc, and flat against British sterling. The region’s jobless rate fell less than initially reported in July and remained unchanged in August, according to Eurostat’s report.
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“Today’s data confirm that the (Japanese) economic recovery has ground to a halt”, Marcel Thieliant, Japan economist at Capital Economics, said in a note.
