THE TAKEAWAY: German CPI comes in 2.2% higher for April when compared to the previous year, reaches 14-month low -> Lower inflation rate could support an interest rate cut -> Euro falls against the dollar.
The rate of inflation in Germany reached a 14-month low in April, slowing to 2.2% from March’s 2.3%, when measured year over year using an EU harmonized method. The non-harmonized consumer price index for the month of April rose 0.2% from the previous month and 2.1% from the previous year, both lower than expected.
Oil prices were responsible for the surprisingly low inflation rate, as heating oil price was 1.9% lower when compared to the previous month. Food prices were steady between March and April, according to the Federal Statistics Office.
Germany reported better than expected industrial production and factory orders in March, signaling that the country could be returning to economic growth. Germany has the biggest economy in the Eurozone, and its economic growth and low inflation supports ECB considerations for further interest rate cuts.
EUR/USD took a small drop following the lower than expected inflation, continuing earlier session losses as political uncertainty and Chinese production slowdown has created a risk-off trading environment.
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