Accelerating German Inflation Supports the Euro on the Downturn
German inflation confirmed an acceleration. Harmonized CPI rose to 2.8% vs 2.4% a month earlier and 2.3% in March. This is positive news for the Euro, which is lagging behind the Pound and relatively weak against the Dollar, based on expectations of a looser ECB monetary policy against rivals.
A fresh batch of data from Germany casts little doubt on the ECB members’ widely announced policy easing on 6 June. Nevertheless, the acceleration in price growth, if sustained going forward, reduces the chances of the back-to-back cuts.
A sustained acceleration in inflation could revive interest in the euro, which earlier on Wednesday fell to its lowest in nearly two years. EUR/USD has been hovering around 1.0850 for the past two weeks and could accelerate gains after a pause.
Potential weakness for the euro could come from the economic front, where an economic slowdown and sluggish lending, adding 0.2% to last year, the lowest since 2015, are increasingly evident.
The FxPro Analyst Team
