CPI data key to ECB Monetary Policy
The Eurozone has been performing exceptionally well of late with some of the best growth figures in over a decade. Unemployment is also very impressive at very low levels. Investors are waiting with bated breath to see if there is a change in either interest rate levels or Quantitative Easing (QE). QE is essentially pumping money into an economy in order to stimulate growth. It is far from a proven method, it is very hit or miss, but in the Eurozone’s case it can be argued the measures have worked. Last year the European Central Bank (ECB) cut monthly increments from €60bn to €30bn which caused substantial Euro strength. If there were to be a further cut the Euro could again strengthen considerably.
The one thing holding back a potential change in monetary policy is inflation. Inflation has been an ongoing problem within the Eurozone for a long period. It is a problem that is not easily solved. Especially considering the strength of the Euro at present hindering exports. The Federal Reserve are also making matters worse by some Fed members stating they are unconcerned with the weak value of the USD causing investors to choose the Euro over the Dollar.
That is why today’s inflation data release at 13.30 has the power to influence the markets. Expectations are for a significant fall, however if they are incorrect and the data is not as bad as expected we could see Euro strength. If you have a trade involving the Euro be sure to keep a keen eye on this data release.
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