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Euro Mixed As German Inflation Accelates More Than Expected in August

Euro Mixed As German Inflation Accelates More Than Expected in August

Tzu-Wen Chen, Technical Strategist

THE TAKEAWAY: [Germany’s inflation rate accelerated more than expected in August amid higher energy prices] > [Higher inflation poses challenges for ECB as it considers rate cuts] > [EURUSD mixed]

Inflation in Germany, Europe’s largest economy, accelerated more than expected in August amid higher energy prices. According to the Federal Statistics Office in Wiesbaden, annualized inflation, calculated using a harmonized European Union method, rose to 2.2 percent in August, the first increase since February, from 1.9 percent the previous month. The consensus forecast of 22 economists surveyed by Bloomberg News had projected inflation to rise to 2.0 percent. On a monthly basis, consumer prices rose 0.3 percent in August. Meanwhile, non-harmonized inflation rose to 2.0 percent from a year earlier, and 0.3 percent from a month ago.

With German price pressures above the European Central Bank’s key 2 percent euro-zone inflation rate, the ECB faces additional challenges as it considers cutting its benchmark interest rate to help struggling euro-zone nations. Nonetheless, the German government and the ECB have hinted that they would tolerate higher inflation in Germany as they work to boost overall competitiveness across the euro bloc.

EURUSD 1-minute Chart: August 29, 2012

Euro_Mixed_As_German_Inflation_Accelates_More_Than_Expected_in_August____body_Picture_1.png, Euro Mixed As German Inflation Accelates More Than Expected in August

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

In the minutes following data release, the euro pared advances seen in the lead-up to the release of the German inflation data. At the time this report was written, the EURUSD pair had retained some of its pre-data gains, and was trading at $1.2545.

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

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

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