Investing.com - The euro slumped to 16-month lows against the pound on Tuesday following reports that Germany’s Bundesbank would back easing measures by the European Central Bank and unexpectedly weak German economic sentiment data.
EUR/GBP touched lows of 0.8138, the weakest level since January 2013, and was last trading at 0.8140, 0.18% lower for the day.
The pair was likely to find support at 0.8085 and resistance at 0.8173, the session high.
The drop in the euro came after media reports that Germany’s central bank is open to more stimulus measures from the ECB.
The Wall Street Journal reported the Bundesbank would back monetary easing measures if they were needed to keep persistently low levels of inflation from becoming entrenched in the euro zone.
The ECB warned last week that it is “comfortable” with acting at its next meeting in June after it has a chance to review the latest economic projections.
The single currency also came under pressure after data showed that German economic sentiment fell to a 16-month low in May.
The ZEW Centre for Economic Research reported that its index of German economic sentiment dropped to 33.1 this month from 43.2 in April. Analysts had expected a reading of 41.0.
The current conditions index improved to 62.1 from 59.5 in April, ahead of expectations of 60.5.
Demand for sterling continued to remain supported ahead of the latest U.K. jobs report and the Bank of England’s quarterly inflation report on Wednesday.
The BoE was widely expected to upgrade its forecast for growth when it presented its quarterly inflation report on Wednesday.
The latest U.K. jobs report, also due for release on Wednesday, was expected to show a another decline in the unemployment rate to a more than five year low of 6.8% in the three months to March, while wage growth is expected to rise again.
A strong reading would reinforce expectations that the BoE will raise interest rates ahead of other central banks.
Elsewhere, the single currency fell to one-month lows against the dollar, with EUR/USD down 0.36% to 1.3708 and dropped to session lows against the yen, with EUR/JPY at 140.25.