The euro rose to session highs against the dollar on Monday after data showing that the annual rate of inflation in the euro zone fell to the lowest level since November 2009 in March fuelled expectations for further easing measures by the European Central Bank.
Euro moves higher as weak euro zone inflation data boosts stimulus outlook
EUR/USD briefly touched lows of 1.3724 before advancing 0.17% to 1.3774, up from 1.3750 ahead of the data.
The pair was likely to find support at 1.3704 and resistance at 1.3800.
Eurostat said the annual rate of consumer inflation slowed to 0.5% this month from 0.7% in February, undershooting expectations for a reading of 0.6%. The ECB targets an inflation rate of just under 2%.
The report showed that core inflation rose 0.8% in March, in line with forecasts, but down from 1.0% in February.
The euro fell to one-month lows against the dollar last week after ECB officials indicated that they are considering fresh policy options to stave off the risk of deflation in the region.
ECB governing council member and Bundesbank head Jens Weidmann said that a negative deposit rate could be an appropriate way to address the impact of strong gains in the euro.
The same day ECB President Mario Draghi that the central bank stood ready to act if inflation slipped lower than the ECB expected.
The weak data fuelled expectations that the ECB could take steps to bolster the fragile recovery in the euro area at its upcoming policy meeting on Thursday. Last month the central bank left rates on hold, but indicated that it was prepared to take decisive action if the inflation outlook continued to deteriorate.
The euro also strengthened against the euro and the yen, withEUR/GBP rising 0.21% to 0.8280 and EUR/JPY advancing 0.51% to 142.11.
In the U.K., the Bank of England said Monday that mortgage approvals fell to 70,309 in February from 76,753 in January.
The BoE also said net lending rose by ₤2.3 billion last month, in line with forecasts and up from ₤2.1 billion in January.
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