EUR/USD: German inflation for December surprises to the upside – Commerzbank
|Over the past few days, we have discussed several times within the team whether the euro has anything to offer against the Trump-induced USD strength at the moment, given the significant growth differential, Commerzbank’s FX analyst Michael Pfister notes.
ECB is likely to continue to lower rates gradually
“Yesterday's first estimate of German inflation for December, which surprised to the upside, was a welcome distraction. This makes it much more likely that we will also see higher figures for the euro area as a whole today (following the upward surprise in Spanish figures we have already seen).”
“In the short term, this is certainly a good sign for the euro. After all, it makes a major rate cut of 50 basis points at the meeting at the end of the month very unlikely. Rather, the ECB is likely to continue to lower rates gradually.”
“In the medium term, however, higher euro area inflation is not necessarily a positive for the euro: if, as our economists expect, growth remains rather sluggish while inflation picks up, discussions of stagflation are likely to intensify. We are not quite there yet, but it is something to keep in mind.”
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