Germany moved the euro – Commerzbank

German inflation figures were the main focus for EUR/USD on Thursday. After Spanish CPI numbers came in slightly below expectations, causing temporary euro weakness, German regional CPI numbers pushed EUR/USD below the 1.11 level. Official figures then confirmed the pre-announcements – at 1.9%, the inflation rate was below the central bank’s target for the first time in 3 years, notes Commerzbank currency analyst Volkmar Baur.

EUR/USD will be moved by Eurozone inflation

“More inflation data is expected today: first at 10:00 (UTC+1) are inflation rates for the Eurozone. The Fed’s preferred inflation gauge for the US, the PCE deflator, will be released at 1:30 p.m. However, neither figure is likely to have the same impact on the exchange rate as yesterday’s. In the case of the euro figures, this is because a number of national statistical offices have already published their figures yesterday.”

“A downward surprise is expected. The Bloomberg survey of economists taken ahead of yesterday’s numbers still shows a 2.2% expectation, and YoY Harmonized CPI came in as expected. The situation is similar for the US figures. Consumer prices (CPI) and producer prices (PPI) are always released mid-month in the US, with most components of these indices going directly into the PCE deflator. Again, the potential for surprises is limited.”

“Furthermore, the focus in the US is now clearly on next week’s labor market data. Statements by Fed members in recent weeks have made this clear. Inflation no longer stands in the way of rate cuts. It now depends on the labor market how fast and how much interest rates will fall. Meanwhile, the situation in the euro area is still different. The economy is already weaker. The persistence of inflation makes ECB members cautious about further interest rate cuts. If an inflation number is going to move EUR/USD again today, it is more likely to be the Eurozone one.”