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Euro stays intact despite German inflation disappointment


  • German inflation misses forecasts in March but rebounds from its February low
  • ECB members call for policy normalization
  • EURUSD hovers under its short-term resistance

German price growth accelerated in March underpinning the European Central Bank’s stance to begin policy normalization relatively soon. However, inflation missed the median estimate while a base effect stopped undermining annual price growth.

link do file download linkEMU inflation is expected to speed up this month following higher readings coming from Germany and Spain. Source: Macrobond, XTB Research

The annual rate of inflation increased to 1.5% from 1.2% (HICP) falling short of expectations suggesting a bounce to 1.6%. In monthly terms the HICP measure dipped from 0.5% to 0.4% though reflecting that momentum has yet to accelerate. The data suits the latest ECB projections seeing inflation hovering around 1.5% for the rest of the year. It’s worth mentioning that the latest comments from ECB members suggest that a majority of them agree to begin a policy normalisation process before long. For one, ECB Knot said earlier today that he sees greater risks of them acting too slow rather than too quick. In a separate report we knew that Spanish price pressure also built albeit less than anticipated. In turn reports from France and Italy will be released tomorrow.

link do file download linkDespite a miss in German inflation the shared currency remained unimpressed. Technically the pair is moving in the vicinity of an upper limit of a lately broken channel. Until the price stays below this level a pullback toward 1.22 or even below seems to be on the cards. Source: xStation5


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