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Euro Slides As Lower German CPI Quells ECB Rate Hike Expectations

Euro Slides As Lower German CPI Quells ECB Rate Hike Expectations

2012-03-28 12:37:00
Tzu-Wen Chen, Technical Strategist
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THE TAKEAWAY: [German CPI slows more than expected] > [Quells support for ECB rate hike] > [Euro weakens]

German CPI inflation slowed more than expected in March after hitting a three-month high in February on the back of rising energy prices. The eurozone’s largest economy posted a year-over-year inflation rate of 2.1 percent, falling from 2.3 percent in February and missing the consensus forecast of 2.2 percent according to economists surveyed by Bloomberg News. Consumer prices rose 0.3 percent from the previous month as expected, declining from February’s reading of 0.7 percent.

EU-harmonised CPI rose 2.3 percent in March over the previous year in line with expectations, slowing from 2.5 percent in February. On a month-over-month basis, EU-harmonised CPI decelerated from 0.9 percent in February to 0.4 percent in March. The lower-than-expected outcome appears unlikely to support ECB rate hike expectations.

EURUSD 1-minute Chart: March 28, 2012

Euro_Slides_As_Lower_German_March_CPI_Quells_ECB_Rate_Hike_Expectations_body_Picture_1.png, Euro Slides As Lower German CPI Quells ECB Rate Hike Expectations

Chart created using Strategy Trader – Prepared by Tzu-Wen Chen

As seen in the EURUSD 1-minute chart above, the euro weakened against the euro, as the lower-than-expected inflation data quelled support of ECB rate hike expectations. The euro fell 10 pips against the greenback in the first 15 minutes after the data release, and was trading around $1.3331 at the time of this report.

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