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You are here: Home / Euro / Eurozone inflation cools

Eurozone inflation cools

January 31, 2018 by Lewis Edmonds

Eurozone inflation cools

The Eurozone’s inflation rate cooled at the start of the year, potentially pushing back hopes that monetary policy would be tightened sooner rather than later. Even though the 1.3% that was announced was the same as the figure that analysts anticipated, it was a still a 0.1% drop from the previous month and pushes the reading that much further behind the 2% target set by the European Central Bank (ECB). This has weakened the Euro and helped the GBP/EUR exchange rate to push up above to the 1.14 level again.

This could be the only hindrance for the Euro at present. The Eurozone economy is outperforming most predictions set by analysts and has led to speculation that the ECB could potentially raise interest rates despite lower inflation. These rumors will continue to drive the Euro’s strength in my opinion.

The unemployment rate released today by the EU also cemented the Eurozone’s strength, with the official unemployment figure remaining at its lowest level since the financial crisis.

Also related to the Euro, for the remainder of the week we will see Manufacturing data and Producer data released on Thursday and Friday. The price of the Euro will likely be driven by what picture these data releases paint following weaker than expected inflation. An upturn in Producer and Manufacturing prices is likely to feed into inflation further down the line and will be seen as a positive for the Eurozone, as it could lead to a tightening of monetary policy sometime around September.

The price of the Euro at present is very much based on the ECB sticking to this September deadline to reduce Quantitative Easing. If the deadline is pushed further away by a weak performing Eurozone economy, expect the Euro’s value to fall and vice versa if it continues to surprise analysts.

Filed Under: Euro Tagged With: ECB, Euro weakness, Inflation, Quantitative Easing (QE)

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Lewis Edmonds

When he is not offering insights into the what is happening on the currency markets Lewis manages key relationships for an authorised payment institution in the UK.

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