FX Roundup: Euro stumbles on data, Indian rupee rises on budget statement

The euro headed lower on Monday following a surprise decline in inflation, while the Indian rupee rose as the country’s finance minister unveiled a commitment to reduce the fiscal deficit and give India's central bank a monetary policy committee.

The Eurozone unexpectedly entered deflation in February. Data published by Eurostat revealed the consumer price index fell 0.2% year-on-year this month, compared to analysts’ expectations of 0% and January’s 0.3% gain.

“Coming in at -0.2% (the first deflationary reading since last September) against the 0.0% expected, and the promising 0.3% last month, this latest inflation figure almost surely guarantees action from Mario Draghi when the European Central Bank meets next Thursday,” said Connor Campbell, financial analyst at SpreadEx.

At 1619 GMT, the euro shed 0.68% and 1.06% against the dollar and pound, changing hands at $1.0860 and £0.7798 respectively.

Elsewhere, the pound got some respite, but continued to trade at six-year lows versus the dollar, as 'Brexit' concerns lurk around, with a referendum on the UK’s membership of the European Union set for 23 June. A pound was fetching on average $1.3925, rising a modest 0.39% intraday.

In the US, MNI’s February Chicago manufacturing sector purchasing managers’ index declined 8.0 points to 47.6 versus consensus of 52.8. The National Association of Realtors’ pending home sales index for January declined by 2.5% month-on-month versus consensus of 0.6%.

Subsequently, the greenback retreated against selected crosses. The yen changed hands to a dollar at JPY112.88, with the US currency 0.98% lower. The greenback also fell versus the Swiss franc fetching CHF0.9967, down 0.04%.

Meanwhile, the Indian rupee also rose against the dollar following the publication of the country’s investor friendly budget. India’s finance minister Arun Jaitley revealed plans to cut the fiscal deficit to 3.5% of gross domestic product (GDP) for 2016-17, from 3.9% the year before.

Jaitley also said India would remove 13 different taxes and streamline its taxation norms, which would “simplify doing business” and boost business confidence.

On the monetary policy front, he said the country's central bank – the Reserve Bank of India (RBI) – would benefit from the establishment a monetary policy committee. The move is in line with reforms sought by current RBI governor Raghuram Rajan.

At the close of trading in Mumbai, a $1 changed hands at INR 68.4335, with the greenback around 0.31% lower.

Commodity linked currencies also had a better session in Europe. The greenback was broadly flat against the Canadian dollar changing hands at CAD$1.3526. A plethora of other commodity currencies rose, particularly in Latin America, with the dollar falling 0.96%, 0.72% and 0.38% against the Mexican, Colombian pesos and the Brazilian Real respectively.

Finally, the Australian dollar rose 0.36% against the greenback exchanging at US$0.7152, but the New Zealand dollar fell 0.50% exchanging at US$0.6596.

Jane Foley, senior FX strategist at Rabobank, said, "Continued concern about the pace of growth in China and in particular Chinese demand for commodities is also likely to remain an ongoing theme for Australian dollar this year.

"Unless dollar bulls reemerge, the Reserve Bank of Australia may need to give the AUD a prod to push it lower and we expect further easing this year. We look for a move to AUD/USD 0.65 on a nine month view."