Euro declines as cooling inflation gives ECB scope for easing

Kiwi Rises

New Zealand’s dollar strengthened for a second day against the greenback after the National Bank of New Zealand said its business confidence index rose to 39.4 this month from 22.7 when the previous survey was taken in December.

The currency advanced 0.1% to 82.86 U.S. cents after advancing 0.3% yesterday.

South Africa’s trade shortfall reached 24.5 billion rand ($2.8 billion) last month compared with 2.7 billion rand in December, the Pretoria-based South African Revenue Service said. The median estimate of eight economists in a Bloomberg survey was 9.7 billion rand.

The nation’s currency extended its decline today to 1.8% to 8.9799 per dollar.

Italian Finance Undersecretary Gianfranco Polillo said a union of Pier Luigi Bersani’s Democratic Party and the group led by Silvio Berlusconi was “the only possible way.” Berlusconi, who left office in November 2011 with yields approaching euro-era highs, ran on promises to reverse austerity.

Prices Gauge

Euro-zone innflation eased to 2% in January from 2.2% in December, the European Union’s statistics office said. Seven euro-area economies are expected to shrink this year, with the Netherlands joining Italy, Spain, Portugal, Greece, Cyprus and Slovenia, the Brussels-based European Commission said Feb. 22.

The ECB will probably maintain its benchmark interest rate at 0.75% next week, according to a Bloomberg News survey of economists. The central bank will update its December economic forecasts after the euro area’s recession deepened in the fourth quarter. The European Commission sees inflation at 1.8% this year and 1.5% in 2014.

“Draghi has been sounding a little bit more dovish,” Credit Agricole’s Harajli said. “We continue to look for a rate by 25 basis points later on this year by the ECB. The figures we got overnight argue in favor of our view.”

The Dutch budget deficit will breach the European Union limit again this year and next as the economy shrinks and unemployment increases, according to the government’s planning agency. German unemployment unexpectedly fell in February amid signs that Europe’s biggest economy is returning to growth.

Deficit Watch

“That doesn’t stop people from sleeping,” Sebastien Galy, a foreign-exchange strategist in New York at Societe Generale SA, said of the Dutch deficit. “It’s a fair statement to say that if countries fairly close to Germany in terms of behavior aren’t following the criteria, that weakens the hands of the most austerity-prone people.”

U.S. gross domestic product grew at a 0.1% annual rate, up from a previously estimated 0.1% drop, revised figures from the Commerce Department showed.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, rose 0.2% to 81.797, after reaching 81.948 on Feb. 26, the highest since Aug. 22.

Bloomberg News

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