Euro retreat brings deflation in the Eurozone closer

The euro drops at its lowest level in three weeks against the dollar in light of the deflation recorded in Spain in March and the concerns of investors about the strength of the single currency after statements by ECB officials on the monetary policy being followed.
 
Specifically, the euro exchange rate records losses of 0.2% and stands at $ 1.3710.
 
The announcement of the Spanish statistical office that the consumer price index fell in March by 0.2% compared to March 2013 led to the depreciation of the euro, while, according to traders of foreign exchange markets, more sellers are likely to show up if the inflation figures for Germany show subdued price pressures in Europe's largest economy. In this case, the Eurostat figures to be released Monday may record a deceleration for the entire Eurozone and increase the chances for new measures by the ECB to prevent a potential deflation. ECB’s Board will meet Thursday to decide on its monetary policy.
 
The Spanish consumer price index recorded its largest drop in the last 4.5 years, raising concerns about the emergence of deflation in the Eurozone. Retail sales in Spain fell by 0.5% in February, as the Spanish economy struggles to return to solid growth.
 
Yields on 10-year German government bonds fell to 1.52%, while the corresponding Spanish and Italian securities fell to their lowest levels in 8 years, at 3.22% and 3.27% respectively. Only 2 of the 72 economists polled by Reuters predict rate cuts by the ECB on April 3rd.