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Forex News: German Inflation Confirmed at 2.0%

Forex News: German Inflation Confirmed at 2.0%

Benjamin Spier, Technical Strategist

THE TAKEAWAY: German inflation confirmed at 2.0% in October -> ECB maintains a 2% inflation target, 2.5% Euro-zone inflation expected -> Euro drops slightly

German annual inflation remained at 2.0% for the second straight month according to a final estimate of the October consumer price index by the Federal Statistical Office. The final CPI estimate confirmed a preliminary estimate of 0.0% change in consumer prices over the month, and a 2.0% rise in prices from October 2011.

The inflation rate was largely driven by a rise in energy prices, which were up 5.5% from October 2011; excluding the rise in energy prices, annual inflation was only 1.6%. Food prices were 3.3% higher from October of last year, while the prices for services only rose by 1.1% annually.

The Euro-zone annual inflation will be reported next week, and 2.5% is expected. The European Central Bank keeps a 2% inflation target according to forex news sources, and continued inflation above that rate could discourage the central bank from cutting the interest rate in an upcoming meeting.

The Euro moved slightly lower against the US Dollar following the release, despite the inflation rate meeting previous estimates. EURUSD might find support at 1.2740, by a 38.2% retracement of the rally from July through September. Resistance could be provided by a 200-day moving average, currently at 1.2818.

EURUSD 15-minute: November 9, 2012

German_Inflation_Confirmed_at_2.0_body_eurusd.png, Forex News: German Inflation Confirmed at 2.0%

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