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Euro-Zone Inflation Confirmed Below the ECB Target

By Benjamin Spier
15 March 2013 10:39 GMT

THE TAKEAWAY: Euro-zone inflation confirmed at 1.8% in February -> Low inflation allows ECB to remain accommodative -> Euro trading slightly higher

Euro-zone annual inflation was confirmed at a new 2-year low of 1.8% in February, unchanged from a flash estimate by Eurostat, and down from 2.0% in January. Consumer prices were up 0.4% over the month of January, according to Eurostat.

The lowest annual inflation was seen at 0.1% in Greece, and Estonia reported the highest inflation at 4.0%. Electricity prices and fruit and tobacco prices had some of the biggest upward impact on inflation.

The ECB maintains a 2.0% inflation target and the EU predicts 1.8% inflation for 2013. Therefore, as long as inflation remains below 2.0%, the ECB can continue with accommodative policy. Lower inflation is Euro negative, as it allows the ECB to keep looser policy, but Draghi said in March that the economic situation in the Euro-zone will have to worsen before he’ll consider a rate cut.

The Euro did rise a few points following the release, most likely a continuation of movement of the previous hour and not a reaction to the inflation release. EUR/USD is currently trading slightly below 1.3070 in Forex markets, and may see support by the key 1.3000 today. Resistance may be seen by the 100-day moving average currently at 1.3123.

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EURUSD Daily: March 15, 2013

Euro-Zone_Inflation_Confirmed_Below_the_ECB_Target_body_eurusd_daily_chart.png, Euro-Zone Inflation Confirmed Below the ECB Target

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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15 March 2013 10:39 GMT