Euro reached its lowest point since December 2013, and the GBP experienced a slip after attempting to maintain 1.6500. Will the bearish trend continue to worsen?

After FOMC announced tapering at last week's meeting, Euro and GBP closed slightly weaken against Dollar, but shortly thereafter, Euro fell to its lowest since December 2013. The reason are widespread concerns of deflation in Eurozone and turmoils in emerging markets. While GBP, although it strengthened to 1.6500s, but slipped until market opening this morning. What's wrong in the continent? Is the bearish trend going to ge worse?
bearishDragged by Deflation and Market Turmoils
Year on year consumer prices in Eurozone on January 2014  was 0.7%, slightly decreased from 0.8% in December 2013. However, it was the fourth subsequent below-zero inflation for the region. German CPI (premilinary) also dropped from 1.4% to 1.3%. Before that, president of European Central Bank, Mario Draghi, mentioned that he see no deflation, and is still expecting 2% inflation. ECB, unlike some daring central banks in emerging countries, tend to hold back from making hasty decision. Nevertheless, it appears that the market speculates that they are going to make some move before the Eurozone washed away in deflation.  

Another factor that increased risk in the region is high-risk countries in the European periphery. Although Euro's main countries (as in: German, France, and Italy) are advanced nations, but more than half countries in Eurozone categorized as emerging countries, like Greek. In the midst of capital flights from emerging markets, Euro was affected too. Worried investors turn to USD which is deemed to have the best prospect nowadays.   

The circumstances made a perfect bearish trend for Euro. It doesn't mean that such rally will continue to go on, because no matter what, the regions's economic outlook has recovered. But risk on trading Euro looks like going to be high, especially in anticipation for the upcoming ECB announcement.

ECB was scheduled to announce its policy on Thursday, and it may make for a good bear around the time. With inflation on the brink of deflation, it will be difficult for ECB to play with interest rate. What the market expect is for ECB to release stimulus-esque policy in order to prevent deflation, but if we look back to previous policies, there is very small chance for that. Moreover, stimulus will have negative influence on exchange rates. It is more likely that ECB will modify current policy to reflect recent changes. In other word, it is most probably won't fantastically inflected on Euro.    

Sterling In Waiting
Euro's nearest neighbor, Poundsterling, also suffered downtrend against USD ahead of Bank Of Englans's MPC meeting on February 6. The market wishes for increases on interest rates, as UK unemployment is approaching 7% treshold (BoE promised an interest rate increase if the treshold passed). But there is every chance BoE won't do anything, because of worries over property bubble.
uk
A report sponsored by Ernst&Young (3/2) mentioned that average prices for London housing was 11 times higher than Londoners wages. It was a new high that rouse question on whether London property market has entered its bubble time.  

GBP uniquely influenced by consumption-related datas, including property. However, overall prospect of sterling this week is far better than Euro. Center of attention is on BoE's interest rate decision next Thursday. We can hope for a bullish once BoE signals increasing rates.

Nonetheless, it should be noted that EUR/USD and GBP/USD movements, apart from being affected by announcements from central banks, also significantly influenced by economic datas like PMI and NFP. Note the week's fundamentals, and be specaially careful of NFP release on Thursday, as the previous one proved to be quite a surprise.   

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