It was clear, in order to maintain bullish trend on the euro we had to get better inflation from Germany given this area seems to be the weakest point in the euro zone. It actually happened, German inflation came in above estimations both in annual and monthly basis.
CPI amounted to 1.6% yoy and HICP was at 1.5% yoy, while expectations had indicated 1.4% yoy and 1.3% yoy respectively. Let us recall that Spanish HICP published earlier in the day proved to be higher than estimations as well. On the face of it, it appears to be sufficient to maintain the euro-bullish trend in the near term. However, in that respect, tomorrow’s data from the Eurozone as a whole will be equally important.
HICP inflation in Germany and Spain beat market expectations, a gauge for the euro zone, scheduled on Friday, could be closely monitored as well. Source: Bloomberg, XTB Research
Why inflation is so important for the euro at this stage? Draghi expressed his view quite clearly that an economic upturn has broadened across the euro zone, hence the sole concern seems to come from inflation side. For that reason the ECB could be worry about a recent strength in the euro as it could hinder to get inflation towards its target. The better inflation, the higher chances for even more hawkish tilt from the ECB.
The EURUSD remains in an uptrend and is being propped up by better than expected inflation coming from Europe. Source: xStation5
The main currency pair is rising for the third day in a row and approaching the crucial supply zone placed between 1.1615 and 1.1490. There is no doubt that the trend remains powerful, hence corrective moves towards an ascending trend line could be used as buying opportunities.