In Germany, Europe’s biggest economy, gross domestic product declined by 0.3% last year, the worst-performing Group of Seven nation. The situation is worsening, with December industrial production contracting for the seventh month.
Europe's second-largest economy, France, is in no better condition with its manufacturing sector slumping further into recession.
There's begrudging acknowledgement at European Central Bank (ECB) and Bank of England (BOE) press conferences that rates have probably peaked, but little to no curiosity as to what dangers lurk over the economic horizon. In Germany, unemployment has been rising in recent months, boosting the need for policy easing to create better economic conditions.
ECB President Christine Lagarde has stated rate cuts are likely by the summer. But influential Executive Board Member Isabel Schnabel warned again on Tuesday about inflation reigniting.
Germany's January CPIs will be released today at 11 am (GMT).
The key one, which tracks year-on-year changes, is expected to show inflation falling to 2.9%. The previous value was 3.7%. It should be borne in mind that the latest CPIs for many of the top ten economies showed high inflation. It is possible that the German economy in its January report will show the same adherence to this temporary trend.
If the actual CPI is higher than 3.5%, the EURUSD currency pair is likely to jump to the level of 1.080, or even higher.
The final recommendation is to buy EURUSD if the CPI (year-on-year) comes out higher than 3.5%.
The target for EURUSD is the level of 1.080. A Stop-loss could be fixed at the level of 1.075
This content is for informational purposes only and is not intended to be investing advice.
