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Euro Climbs As German Inflation Remains Steady In July

Euro Climbs As German Inflation Remains Steady In July

Tzu-Wen Chen, Technical Strategist

THE TAKEAWAY: [Germany’s inflation rate unexpectedly remains steady in July] > [Price hold due to rise in energy prices and seasonal factors] > [EURUSD strengthens]

Germany’s inflation rate unexpectedly remained steady in July, after energy prices climbed. According to the Federal Statistics Office in Wiesbaden, annualized inflation, calculated using a harmonized European Union method, stood at 2.0 percent in July for a second month, matching the lowest level since January 2011. Economists surveyed by Bloomberg News had forecast a decline to 1.9 percent. On a monthly basis, consumer prices rose 0.4 percent in July. Meanwhile, non-harmonized inflation remained at 1.7 percent from a year earlier, and 0.4 percent from a month ago.

Despite the higher-than-expected print, there are few risks for strong price increases in Germany in coming months amid the worsening growth outlook for the Eurozone. The statistics office attributed the recent increase in German prices primarily to seasonal factors. Overall price pressures in the euro-zone are expected to remain subdued.

EURUSD 1-minute Chart: July 27, 2012

Euro_Climbs_As_German_Inflation_Remains_Steady_In_July____body_Picture_2.png, Euro Climbs As German Inflation Remains Steady In July

Chart created using Market Scope – Prepared by Tzu-Wen Chen

The euro extended earlier gains against the U.S. dollar in the minutes after the release of German CPI data, climbing as much as 34 pips. At the time of this report, the EURUSD pair continued to trade higher at $1.2316.

--- Written by Tzu-Wen Chen, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.