We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
Oil - US Crude
Mixed
Bitcoin
Bullish
More View more
EUR/USD Still Heavy Despite Higher Euro-Zone Inflation

EUR/USD Still Heavy Despite Higher Euro-Zone Inflation

2017-03-02 10:57:00
Nick Cawley, Analyst
Share:

Talking Points

- Euro-Zone inflation hits 2% y/y in February, up from 1.8%, but the core rate remains at 0.9%.

- Euro-Zone unemployment stable at 9.6%.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

Inflation in Europe increased to a four-year high of 2% in February, in line with market expectations, leaving ECB President Mario Draghi open to more questions over the central bank’s accommodative monetary policy. President Draghi however will be able to point to a stable core inflation rate of 0.9% as vindication of his policies as energy prices continue to push up consumer prices. According to Eurostat figures, energy prices rose by 9.2% over the year.

Unemployment in the euro-zone remained steady at 9.6% in January, while producer prices for the same month rose to 3.5% y/y, beating expectations of 3.2% and December’s 1.6%.

With core inflation still below target, and expected to move only modestly higher in the next few months, no changes to the central bank’s current monetary policy are expected at the next ECB meeting on March 9. This will leave the EURUSD under pressure in the coming weeks especially as expectations of a March US rate hike have risen sharply in the last few days on the back of hawkish Fed commentary.

On a daily chart the single currency looks vulnerable to further weakening with the January 3 low of 1.03400 a realistic target, especially if 2-year German bond yields remain at, or close to, record low yield levels. The 2-year German Schatz currently trades with a yield of -0.84%, compared to the 2-year US Treasury yield of 1.285%.

Chart: EURUSD Daily Timeframe (December 20, 2016 – March 2, 2017)

EUR/USD Still Heavy Despite Higher Euro-Zone Inflation

Chart by IG

--- Written by Nick Cawley, Analyst

To contact Nick, email him at Nicholas.cawley@ig.com

Don't trade FX but want to learn more? Read the DailyFX Trading Guides

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

DISCLOSURES

News & Analysis at your fingertips.