There were mixed signals around the closely watched inflation figures in Europe’s two biggest economies, as German inflation rose while French inflation showed a slowdown. The euro did come under some selling pressure, although commentators have put this down to trading rather than any specific economic news.
While the euro to dollar rate ended the week roughly where it started, the US dollar dipped against the euro midweek. This was due to the comments of US Federal Reserve Chair Janet Yellen, where she suggested that the federal fund rate ‘would not have to rise all that much further’ to reach a level that would be neutral for the economy – markets were initially fearing a more aggressive stance in raising rates.
As the Deputy Governor of the Bank of England said he was not ready to support a hike in interest rates, sterling reached an eight-month low against the euro, as it dipped below the 1.13 level. However, sterling gained back some ground as UK unemployment figures showed to have fallen to their lowest rate since 1975, albeit alongside a decline in real wages. Nonetheless, sterling had a strong end of the week against the common currency.
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