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German Inflation Eases

Boris Schlossberg, Director of Currency Research, GFT

German import price inflation printed much cooler than expected at -0.5% versus -0.2% eyed hitting a two year low as cheaper energy prices dampened gains. This was the first month over month decline since last October bringing the annual rate to 2.3% - the lowest rate in nearly two years.

Excluding energy, imports remained flat on a month over basis. The lower energy costs are having a positive impact on prices on the consumer level as well. May consumer price data from the German state of Saxony showed cheaper energy dampened the monthly change, while the annual rise slipped below 2% for the first time since early 2011. National estimates of German inflation are scheduled for release later today.

The EUR/USD was higher in opening European trade as equities opened higher helping to support risk flows. After gapping higher in yesterday’s holiday trade the pair sold off in North American and Asian trade, returning to the 1.2500 level, but today’s rebound suggests that euro may trying to establish a base at the figure after relentless selling over the past several weeks.