THE TAKEAWAY: German annual inflation drops to 1.4% in March, new 2-year low -> lower inflation allows ECB to remain accommodative-> Euro sees minor bump on release
German inflation declined to a new 2-year low in March, according to a preliminary estimate by the Federal Statistical Office. Consumer prices were reported 1.4% higher than March 2012, higher than expectations for 1.3%, but lower than the 1.5% annual inflation in February. Consumer prices rose 0.5% on a monthly basis in March.
Energy prices rose 0.5% annually in March, much lower than the overall index. Food prices rose 3.7% from March 2012, up from the 3.1% annual price increase in February.
The new low in German inflation reflects the 2-year low Euro-zone wide inflation announced at 1.8% in February. The ECB predicts inflation will remain below its 2% inflation target over the coming months, which allows the central bank to remain accommodative in its policy. Therefore, further declines in Euro-zone inflation are Euro negative.
That’s why the slightly better than expected German inflation release gave the Euro a minor boost in Forex trading. EUR/USD is trading below 1.2850 at the time of this writing, and resistance might next be seen by the 200-day moving average at 1.2880. Support may be provided by a longer term support line around 1.2820.
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EURUSD Daily: April 02, 2013
Chart created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to firstname.lastname@example.org .