The euro fell to its weakest level since November against the dollar yesterday, due to dollar strength and the prospect of prolonged monetary stimulus from the European Central Bank.
Unlike the Bank of England and the Federal Reserve, the European Central Bank has given little indication that it will hike interest rates or taper monetary policy anytime soon. This is causing the single currency to weaken.
Data yesterday showed that inflation for the Eurozone rose to 2.2% annually, the highest figure in nearly three years and above the European Central Bank’s target of 2%. This is due to rising prices due to the reopening of the economy, with the main rises seen in energy, food, alcohol, tobacco and services.
The European Central Bank takes the view that this higher inflation is transitory.
