Low inflation in Germany pushes EURUSD downward

01 February 2024 113
Low inflation in Germany pushes EURUSD downward

German inflation slowed by more than expected at the start of 2024 — part of a broader retreat across the continent that will allow the European Central Bank to begin cutting interest rates in the coming months.

 

Consumer prices rose an annual 3.1% in January, the statistics office said Wednesday. That’s down from December’s 3.8% and below the 3.2% estimated by economists surveyed by Bloomberg.

 

Earlier Wednesday, France also reported a steeper-than-expected slowdown in inflation, to 3.4%. Data for the 20-nation eurozone are due Thursday, with a separate poll suggesting a moderation to 2.7% from 2.9%.

 

ECB officials insist it’s too soon to declare victory over inflation, seeking assurance that price gains are on their way to 2% before making any move to loosen monetary policy.

 

Some experts believe there’ll be enough information to make a decision by April, when markets are betting rate cuts will begin. President Christine Lagarde is among those arguing a move is more likely in June, after the results of first-quarter wage bargaining are clear.

 

Inflation is “absolutely moving in the right direction,” Bundesbank President Joachim Nagel said late Tuesday, highlighting that core price pressures remain too high, energy costs are volatile and future wage growth is uncertain. He reiterated the ECB’s official policy line that the current rate-cut debate is premature, without revealing a concrete preference for when to act.

 

The overall recommendation is to sell EURUSD provided the actual CPI numbers for the eurozone come out no worse than forecast. A profit on EURUSD selling should be taken at the level of 1.072.

A loss on EURUSD selling should be fixed at the level of 1.093.

 

This content is for informational purposes only and is not intended to be investing advice.

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