The rate of growth of the Eurozone area has often been referred to as glacial and todays data continues that analogy perfectly.
Eurozone September HICP inflation rose to 0.4% y/y from 0.2% y/y in the previous month, in line with expectations and indications from national data yesterday and earlier today. The uptick in the annual rate is mainly a reflection of less negative base effects from energy prices and core remained steady at 0.8% y/y. So a confirmation of the ECB’s baseline scenario that inflation is slowly moving higher, but with headline rates still far below 2% the data still back the central bank’s accommodative policy stance. There was also the unemployment numbers that remained steady at 10.1% in August. The overall rate still masks considerable divergence across Eurozone countries and the situation is even worse among those under 25, although overall youth unemployment dropped slightly to a still very high 20.7%, from 20.8% in July. Still rates range from just 6.9% in Germany to over 40% in Spain and Greece. And while it seems that at least the downtrend is continuing, the fact remains that more structural reforms are needed to change the picture decisively.
Glaciers, central banks and governments are not known for their rapid, sudden or decisive movements. EURUSD ebbed under 1.1200, earlier leaving a nine-day low at 1.1168. EURJPY and other euro crosses are also down, thought month-end demand for EURGBP from European central banks may have helped limited declines. The flurry of Eurozone data didn’t appear to have impacted much.
A close in EURUSD below 1.1183-92, which encompasses Wednesday’s low and the current position of the 50-day moving average, would affirm a turning-bearish technical picture. The 200-day moving average is at 1.1161.
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