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Three Year Inflation Low Fails to Move Euro

Benjamin Spier

THE TAKEAWAY: Euro-zone inflation confirmed at 1.2% -> Euro-zone trade balance reaches a record high -> Euro trading steady

The Euro-zone inflation rate was confirmed at a three year low in April, according to a final estimate by Eurostat. The consumer price index was reported at 1.2% higher than April 2012, unchanged from a previous estimate and down from 1.7% inflation rate in March. Euro-zone consumer prices fell 0.1% in March on a monthly basis.

The Euro-zone trade balance was reported at a record high 18.7 billion Euros in March (seasonally adjusted), beating expectations for 11.5 billion Euros and up from a revised 12.7 billion Euros in February.

The Euro-zone inflation rate is well below the ECB’s 2% inflation target, and therefore allows the central bank to remain accommodative. The ECB cut the interest rate by 25 basis points to 0.50% in the May meeting. Therefore, a lower than expected inflation rate may be Euro negative.

However, the Euro did not react to the as-estimated inflation report. EUR/USD is trading around 1.2875 at the time of this writing. The pair may see support around a six month low at 1.2750, and resistance may be provided around the key 1.3000 figure.

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EURUSDDaily: May 16, 2013

Three_Year_Low_Inflation_Fails_to_Move_Euro_body_eurusd_daily_chart.png, Three Year Inflation Low Fails to Move Euro

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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