The German regional inflation numbers have been coming up individually for each state all morning, as is the case with this federal country. The main number is yet to be published but all the regional numbers point in one direction, up and away.
All the regional inflation numbers moved above 2%, which is the target for most central banks of the developed world, so expect the main number to be in the same region.
The annualized inflation in North Rhine-Westphalia moved to 2.3% from 2.1% previously. I don´t want to waste your time by going into details of every German state, but I can say that the numbers were great overall and I even saw a couple of them at 2.4 – 2.5%.
This is more than a trend; this is a surge.
By great, I mean it´s good that we´re moving higher after years of very low inflation, and even deflation, in some cases. However, too much inflation is not good either and judging by the trend of the last few inflation reports, I won´t be surprised to see it reaching 3% in less than a year.
Obviously, it´s mainly energy driven because the core inflation number is lower, but that´s picking up too and if it follows the same trend, then things will start to get dangerous. The ECB is sticking to the core number at the moment, but expect the Germans to start panicking soon and start running around the EU corridors like basket cases.
The Euro should have at least taken notice, but there are many other important things at the moment. It will do so when the ECB starts to acknowledge the recent pickup in inflation.
That would be the best time to start building long positions in Euro pairs, in my opinion, particularly against the GBP. We still have the French elections coming up, so one step at a time.