Euro Strengthens, European Stocks Retreat Despite Inflation Data; Euro-Zone CPI Data Steps Up Pressure on European Central Bank
The euro strengthened Monday, while European stocks retreated from early highs, despite data showing inflation in the euro zone sank to its lowest level since 2009.</br></br>The anemic pace of price increases steps up the pressure on the European Central Bank to introduce fresh measures to stave off low inflation, but analysts and investors say the ECB will need to back up its recent dovish rhetoric with action before the euro will weaken significantly.</br></br>The European Union's statistics agency Monday said consumer prices rose 0.5% from March 2013, the lowest annual rate of inflation since November 2009 and well below the European Central Bank's target of just under 2%.</br></br>The euro dipped immediately after the data, but quickly recovered. At the end of the European session it was 0.2% higher against the dollar at $1.3777. It remains not far below the 21ã2-year high of almost $1.40 hit early this month. The common currency gained 0.3% against the yen on Monday.</br></br>"The market is testing the ECB's resolve. Investors are waiting to see concrete action and we will not see the euro weaken in a sustainable fashion until we get that," said Phyllis Papadavid, a senior foreign-exchange strategist at BNP Paribas.