THE TAKEAWAY: German producer prices unchanged in October -> Higher prices make interest rate cut less likely -> Euro trading higher
German producer prices were unchanged in the month of October, according to a release by the German Federal Statistical Office. The 0% change in October producer prices was slightly lower than expectations for a 0.1% rise and lower than September’s 0.3% rise in prices. Producer prices were 1.5% higher than October 2011.
Fuel prices fell for producers by 2.3%, following 3 straight months of rises in fuel prices. Meanwhile, food and beverage prices for produces rose 0.5% in October. German consumer prices for October were 2.0% higher than October 2011, slightly higher than the reported annual rise in producer prices.
The annual inflation for the entire Euro bloc was reported at 2.5% for October, which is still slightly higher than the ECB’s target 2%. Higher prices discourage the European Central Bank from cutting interest rates to help the struggling economy, and cutting interest rates is Euro negative.
However, the Euro rose slightly against the US Dollar in currency markets following the release of the lower than expected German producer prices. EURUSD is currently trading slightly below the key 1.2800 figure; resistance might now be provided by the former support line at 1.2824.
EURUSD 15-minute: November 20, 2012
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