A while ago, we had the Eurozone services report which was quite positive. That´s been following in the footsteps of the recent economic reports from the Euroland, such as the positive Eurozone manufacturing PMI data on Monday and the impressive German inflation report yesterday.  

Speaking of inflation, the EU inflation report was released just now and that was another positive reading, albeit not as strong as the German inflation report we saw yesterday. The annualised Eurozone CPI (consumer price index) for December came out 0.1% higher than expected and nearly double from the previous reading.

That´s a huge jump, but the central banks now are focusing more on core inflation. They always put the attention on whichever number suits them best. When they started their monetary easing process, they focused on the headline inflation number, the CPI. It was low since energy prices were tumbling. 

Now that energy prices have picked up, which have pulled the CPI higher, the attention shifts to the core CPI number which strips out energy prices and building materials. This number is obviously smaller since energy prices and oil, in particular, have contributed to a large part of the main headline inflation number. 

The EU inflation uptrend in Q2 2016 is undeniable. 

But core CPI is rising as well. It also ticked higher from 0.8% to 0.9%. As you can see from the EU inflation chart above, the main inflation, which is represented by the green/red field, has been substantially lower than the core inflation, which is displayed by the yellow line. That´s been the case since 2013 and, as you can see, we have experienced deflation three times. 

Now inflation is in a much better state in Europe, among other sectors, such as manufacturing and services. If this continues for a couple more months, I bet the Germans will be jumping up and down in panic and the ECB will be forced to revise their monetary policy. So Euro buyers, be ready to open some long Euro trades, but not against the USD.