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German Inflation Confirmed at a 2-Year Low

By Benjamin Spier
12 March 2013 07:34 GMT

THE TAKEAWAY: German inflation confirmed at a 2-year low of 1.5% in february -> Euro-zone inflation remains below the ECB target -> Euro trading steady

German annual inflation was confirmed at the lowest level in February in over two years, according to a final estimate released by the Federal Statistical Office. Consumer prices rose 1.5% from February 2012, and prices were 0.6% higher since January.

German energy prices were one of the main drivers of the inflation, rising 3.6% from February 2012. Food prices rose 3.1% over the same period, and not including energy and food, inflation was only 1.1%.

Germany is the biggest economy in the Euro-zone, and therefore changes in inflation there may be indicative of price changes across the region. Euro-zone inflation also hit a 2-year low in February at 1.8%, and the EU predicts 1.8% annual inflation for the whole of 2013. Inflation below the ECB’s 2% target rate allows the central bank to remain accommodative. Therefore, lower inflation is Euro negative.

However, the confirmation of a previously estimated German inflation had no significant effect on Forex markets. EUR/USD is trading around 1.3020 at the time of this writing, and support might be provided by the key 1.3000 line. Resistance may be provided at 1.3055, by the 38.2% Fibonacci retracement of the move from the pair’s all time high to its all time low.

EURUSD Daily: March 12, 2013

German_Inflation_Confirmed_at_a_2-Year_Low_body_eurusd_daily_chart.png, German Inflation Confirmed at a 2-Year Low

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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12 March 2013 07:34 GMT