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German Inflation Falls to a New 2-Year Low

German Inflation Falls to a New 2-Year Low

2013-04-02 12:29:00
Benjamin Spier, Technical Strategist
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THE TAKEAWAY: German annual inflation drops to 1.4% in March, new 2-year low -> lower inflation allows ECB to remain accommodative-> Euro sees minor bump on release

German inflation declined to a new 2-year low in March, according to a preliminary estimate by the Federal Statistical Office. Consumer prices were reported 1.4% higher than March 2012, higher than expectations for 1.3%, but lower than the 1.5% annual inflation in February. Consumer prices rose 0.5% on a monthly basis in March.

Energy prices rose 0.5% annually in March, much lower than the overall index. Food prices rose 3.7% from March 2012, up from the 3.1% annual price increase in February.

The new low in German inflation reflects the 2-year low Euro-zone wide inflation announced at 1.8% in February. The ECB predicts inflation will remain below its 2% inflation target over the coming months, which allows the central bank to remain accommodative in its policy. Therefore, further declines in Euro-zone inflation are Euro negative.

That’s why the slightly better than expected German inflation release gave the Euro a minor boost in Forex trading. EUR/USD is trading below 1.2850 at the time of this writing, and resistance might next be seen by the 200-day moving average at 1.2880. Support may be provided by a longer term support line around 1.2820.

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EURUSD Daily: April 02, 2013

German_Inflation_Falls_to_a_New_2-Year_Low_body_eurusd_daily_chart.png, German Inflation Falls to a New 2-Year Low

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

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