Euro falls on data showing eurozone deflation

[NEW YORK] The euro fell against the dollar and other major currencies Wednesday as weak European inflation data lifted speculation of more monetary stimulus from the European Central Bank.

Official data showed eurozone inflation unexpectedly fell to a negative 0.1 per cent in September, suggesting a dangerous spell of falling prices could be returning to Europe.

In another downcast sign, German retail sales, a closely watched benchmark in Europe's biggest economy, fell by 0.4 per cent in August compared with July, the federal statistics office Destatis said.

The weak inflation report, in particular, caught the attention of currency traders.

It comes "at a time when commodity prices are very low (and) raises the risk of the low inflation sticking, which could revive the talk of additional ECB easing," said BK Asset Management analyst Kathy Lien.

"With inflation heading in the wrong direction, it dialed up already elevated pressure on the ECB to strengthen and extend its already aggressive low-rate policies, weighing on the euro," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

The dollar edged higher against other major currencies ahead of Friday's eagerly anticipated September US jobs report.

AFP