Eurozone CPI Comes in as Expected Posted on August 29, 2014August 29, 2014 by Jarratt Davis The euro was heading for the worst fall in over a decade as markets speculated on ECB action ahead of their policy meeting next week, however with CPI coming out in-line with expectations, this speculation has been dampened. Keep in mind that this figure has previously dropped from 0.5% to 0.4% and it has now dropped to 0.3% which tells us the Eurozone is heading towards deflation, this certainly represents a dire stage for the ECB and they will have to do act accordingly to push back against negative inflation. Because this reading is lower than previous it will allow the ECB to continue dovishly talking the euro down, along with the prospect of announcing QE at some point. Many analysts are looking for the ECB to start a QE program by late Q4 2014 to start Q1 2015 and we will be paying close attention to the ECB meeting next week to look for any hints at QE. There is no doubt the ECB will continue to be very dovish in their policy meetings over the next few months, however the market will want action, either in the form of QE or by cutting interest rates once again in order to really continue selling euros. However, after this reading of CPI came in as expected at 0.3%, speculation is leading to that the ECB might hold off on any imminent action in their meeting next week and hold off for another month. Most analysts expect inflation to remain low and we can look to take advantage of this by selling the euro on rallies.
Posted on: Sat, 30 Aug 2014 14:43:22 +0000
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