Morning Forex Fundamental: EUR

Morning Forex Fundamental: EUR

With inflation set to undershoot the ECB's objective, an interest rate cut appears to be largely constrained by the prospect of an economic recovery in the second half of this year' - Citigroup

Inflationary pressure in the Eurozone eased in February, adding to signs that governments and central bankers can increase their stimulus programmes, as the region's leaders seek to shift their focus to reviving economic growth. A report by the EU's statistics office Eurostat showed that the growth of consumer prices across the 17-nation currency bloc slowed to 1.8%, falling below the European Central Bank's target rate for the first time in more than two years. It is the lowest level since September 2010. Together with a modest increase of wages in the last quarter of 2012, the data highlight the weakness of the region’s economy and fuel expectations that the ECB is to cut interest rates this year.

'With inflation set to undershoot the ECB's objective, an interest rate cut appears to be largely constrained by the prospect of an economic recovery in the second half of this year,' Citigroup said in a research note on Friday.

'There are no easy answers,' European Council President Herman Van Rompuy, who chairs the summit, told a news conference on Thursday night. 'The good progress towards structurally balanced budgets must continue,' he said.