Euro-Zone Inflation On Par with the ECB Target

Benjamin Spier

THE TAKEAWAY: Euro-zone inflation confirmed at 2.0% for January -> Inflation on par with the ECB target -> Euro trading unchanged

Euro-zone annual inflation fell to the lowest level since November 2010, confirming an earlier estimate by Eurostat. Consumer prices fell 2.0% from January 2012, down from 2.2% in December, and on par with the ECB’s 2% inflation target. Consumer prices fell 1.0% in January on a monthly basis.

Greece saw the lowest annual inflation in January at 0.00%, while the Netherlands experienced the greatest inflation in the Euro-zone at 3.2%. Food, alcohol, and tobacco prices rose 3.2% annually, and energy prices rose 3.9% over the same period.

The ECB has previously said that it expects inflation to fall to 2% in the coming months. ECB President Draghi has said that the lower inflation rate has allowed the central bank to remain accommodative. If Euro-zone growth continues to decline, the ECB might cut interest rates. Therefore, lower inflation is Euro negative.

However, the Euro did not significantly react to the as expected inflation release. The Euro declined earlier in the session, as risk trends seemed to drop in currency markets, and EUR/USD is trading around 1.3120 at the time of this writing. Resistance may be provided by the first monthly pivot support line around 1.3184, and support may continue to be provided by the key 1.3000 level. (To learn how to incorporate overbought/oversold signals into your trading click here.)

The other significant release out of the Euro-zone in today’s session was the decline in German unemployment. Even though the unemployment was better than expected, it still had no significant effect on Forex trading.

In Switzerland, the GDP grew by an unexpected 0.2% in the fourth quarter. However, EUR/CHF has dropped closer to the 1.200 SNB enforced floor in previous weeks on Euro weakness. Therefore, the release had no significant impact on the cross’s movement.

Earlier in the day, we heard Japan’e DPJ’s Kaeida say that the party will debate BoJ candidates based on party guidelines, but the opposition party won’t necessarily delay appointments. The government nominated Kuroda to take over as BoJ governor during the Asian session, as was predicted by reports ahead of time.

EURUSD Daily: February 28, 2013

Euro-Zone_Inflation_On_Par_with_the_ECB_Target_body_eurusd_daily_chart.png, Euro-Zone Inflation On Par with the ECB Target
Euro-Zone_Inflation_On_Par_with_the_ECB_Target_body_eurusd_daily_chart.png, Euro-Zone Inflation On Par with the ECB Target

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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