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Forex News: Euro-zone Inflation Remains at a 2-Year Low

Benjamin Spier

THE TAKEAWAY: Euro-zone inflation estimate for December at 2.2%, higher than expected -> Energy prices up 5.2% annually -> Euro trading steady following earlier declines

Euro-zone inflation remained at 2-year low in December, according to an initial consumer prices estimate by Eurostat. The CPI was seen 2.2% higher than December 2011, which was higher than an expected 2.1% inflation and unchanged from November’s annual price change.

Energy prices were 5.2% higher annually, less than November’s 5.7% rise in energy prices. Food, alcohol and tobacco prices were 3.1% higher in December, compared with 3.0% in November. Services prices were up 1.8% from December 2011, compared with 1.6% in November. The full consumer prices report will be released by Eurostat on January 16.

Last month, the European Central Bank decided to keep the interest rate at 0.75%, despite mounting pressures for further rate cuts from two straight quarters of negative growth and predictions for further weakness in the first part of 2013. Lower inflation rates would make it easier to for the central bank to decide to cut its interest rate this month, which would be Euro negative. ECB’s Nowotny previously said that he sees lower Euro area inflation in 2013 and 2014.

The Euro did not react significantly to the slightly higher than expected inflation. EURUSD has fallen towards the key 1.3000 figure since yesterday’s release of the Fed minutes. Support could be provided by the key 1.3000 figure, and resistance could be provided by the previous resistance line at 1.3158.

EURUSD Daily: January 4, 2013

Euro-zone_Inflation_Remains_at_a_2-Year_Low_body_eurusd_daily_chart.png, Forex News: Euro-zone Inflation Remains at a 2-Year Low

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