Eurozone CPI holds its ground - flat in Dec vs -0.2% in the advance reading

Published date: 17/01/2019

EUR/USD is been dipping lower this morning, testing levels of support seen into the mid 1.1300's after the rejection of the move above 1.1500 earlier this month. This morning's second reading for Dec inflation saw the annualised rate for headline CPI unchanged at 1.6%, while the all-important core rate held 1%.  

Whether this can give the EUR some added support in the near term remains to be seen, and as far as the spot rate is concerned, we should start to see more of the USD bias taking over given some will assume much of the bad news is priced in to the single currency - for now at least. 

Naturally, we have to wait and see how the Germany economy performs in the year ahead, though we suspect there are greater concerns over the French economy, where the data has been particularly weak and is exacerbated by the protests against their government's various policy measures. 

For this morning, we are also watching EUR/GBP has a major influence on the spot rate, though in equal measure, this is also pushing up Cable despite the heavy resistance seen into the 1.2900 mark.  

As ever, traders are keen to jump on the new narrative which is that of buying GBP based on the fact that parliament is keen to avoid a no deal.  This should be supportive for the EUR to some degree, but price action in EUR/GBP is key as some choose to express their positive view on the Pound vs the EUR.


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