18.10.201701:50 Forex Analysis & Reviews: Inflation in the euro area remains low-key

The market continues to follow the direction of a strengthening US dollar against a number of world currencies which include the euro.

Data released in the first half of the day on inflation in the euro area did not have a significant support for risky assets as well as data on the growth of consumer confidence in Germany.

According to the report of the statistics agency, inflation in the euro area continues to remain at a level that does not quite satisfy the demands of the European Central Bank. So, the consumer price index in September this year increased by 0.4% compared to August. This results fully coincided with the forecasts of economists. Compared to the same period in 2016, inflation rose by 1.5%, gradually reaching the target level of the ECB which is slightly below 2.0%.

The basic consumer price index, which does not take into account the volatile categories, increased by 0.4% in September and by 1.1% compared with September 2016. This also coincided with the forecasts of economists.

A small support for the euro in the first half of the day was given by a report from the scientific center ZEW. According to them, the level of confidence in Germany grew in October, surpassing the forecasts of economists. As per data, the index of economic expectations in Germany in October 2017 rose to 17.6 points from 17.0 points in September, while economists predicted that in October the index will reach 20.4 points. The index of current conditions in October fell to 87 points.

Data on the US economy supported the US dollar. According to the report, import prices in September 2017 increased by 0.7% compared with the previous month, while economists expected that the price increase would be 0.6%. Excluding oil, import prices rose by 0.3%. In comparison with the same period of the previous year, prices increased by 2.7%.

In general, the technical picture in the EURUSD pair is developing according to the forecast given at the beginning of the week. The main task for the first half of the week for euro sellers remains to be the update to 1.1730 with the output to 1.1680 already closer to Friday.

The British pound declined against the US dollar after a weak inflation report, which slightly alarmed investors expecting interest rates to be raised in November of this year by the Bank of England.

According to a report by the National Bureau of Statistics, the annual rate of inflation in the UK in September of this year was 3%. In September, consumer prices rose by only 0.3% compared to August, while economists forecast a growth of 0.4%

The speech of the Governor of the Bank of England also had a negative impact on the quotes of the pound. Carney said that inflation will peak above 3% in October this year without giving any other comments on the prospects for monetary policy. The main focus of the speech was on Brexit. According to Carney, it is in the interests of all parties.