The drop in inflation seen in March was just a blip. CPI is back on track, rising 1.9% y/y in April. Moreover, core CPI jumps to 1.2%, much better than 1% expected and the highest level since 2013. The rising level of inflation should make the ECB happy, but they will be less welcoming to a strong exchange rate.
EUR/USD jumps to 1.0920. Update: the new high is 1.0944. Resistance awaits at 1.0950, the highest level in 2017. Further resistance awaits at the round number of 1.10. Support is at 1.0870.
More: ECB Nudging Towards A Policy Shift In September – SEB
The euro-zone was expected to report a rise in its inflation figures. Preliminary data for April carried expectations for 1.8% on headline CPI, up from 1.5% in March. Core CPI carried expectations for 1% after 0.7% in March.
EUR/USD was trading just under 1.09 ahead of the publication, drifting a bit higher.
Early figures released by Germany, France, and Spain were solid, beating economists’ expectations. In general, inflation has been pushing higher thanks to the rise oil prices. It reached the holy grail of 2% in February with core inflation sitting at 0.9%. The setback in March looks like a blip.
ECB Watch
Yesterday, the ECB managed to keep its messaged balanced. but this still meant choppiness. At first, Draghi sounded optimistic by talking about diminishing downside risks. Yet after 20 minutes, the president of the ECB showed less confidence about inflation. Did he know something? In addition, the ECB hasn’t begun discussing any kind of exit strategy.
Data released earlier showed an acceleration in the amount of money in circulation. M3 Money Supply jumped to a pace of 5.3% from 4.7% expected. Private loans accelerated to 2.4% y/y, but this was expected.
GDP growth figures also released on this busy morning were mixed. France reported a growth rate of 0.3% against 0.4% expected. Spain surprised with 0.8% instead of 0.7% expected.
The most important GDP release of the day comes from the US. See how to trade the US GDP with EUR/USD.
