Eurozone data misses – ECB in focus


EURUSD, Daily              

Eurozone Aug HICP inflation  –  0.2% y/y, slightly lower than the initially expected rise to 0.3% y/y, but not a surprise after the unexpected drop in the German headline rate yesterday and the steady French number earlier today. Core inflation unexpectedly fell back to 0.8% y/y from 0.9% y/y. Eurozone inflation still is very slowly trending higher, but remains at very low levels, even when taking out the impact of oil prices.

Eurozone July unemployment held steady at 10.1%, against expectations for a slight dip in the headline number to 10.0%. With back revisions the headline rate has remained steady for a while now and is only gradually trending lower, with national rates still showing a wide variations and ranging from just 3.9% in Malta to nearly 20% in Spain (Greece hasn’t released data for June or July yet, but is likely to top the list with a jobless rate of clearly over 20%) Spanish jobless numbers are coming down, however, which is encouraging, although the very high youth unemployment rate in the Eurozone of 21.1% remains a pressing issues for politicians in particular, as it not only reflects modest growth, but also the need for further labour market reforms.

So while the numbers by themselves don’t necessarily call for a further relaxation of the ECB’s very accommodative policy stance, they still give Draghi room to manoeuvre. For now though it seems the ECB is more concerned with trying to distance itself from the Fed’s focus on another rate hike this year then advocating further easing for the Eurozone.

EURUSD eased further, as the USD strengthened,  posting three week lows at 1.1130.  Next support is at the 200 DMA 1.1115 and then 1.1075.  The 4 hour chart is also bearish with a break of the 200 MA and support at 1.1135 being tested.

Janne Muta

Chief Market Analyst

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