Inflation Finally Stabilizes In The Eurozone. What Happens Next?
Skerdian Meta • 1 min read
Inflation has been running higher in the Eurozone as well as in other large economies, due to better economic conditions globally. But in recent months, we have seen it back down slightly.
That raised a few eyebrows at the ECB, but the Germans have since calmed down about the trend.
At least inflation is not slipping any further now. The main inflation figures (CPI) came in at 1.3% as expected, while the core CPI (Consumer Price Index) number came in at 1.1%.
The recent dip in inflation is merely a retrace compared to what we´ve seen in the past decade
These were the expectations both this month and last, so the numbers are unchanged. That's a positive sign if we consider the recent dip in inflation figures, both in the US and in Europe. The UK is a different story, however, due to Brexit.
So, inflation is stabilizing in the short term, but the longer time frame CPI chart is still pointing strongly upward. The recent dip is more of a retrace of the bigger downtrend.
That being said, traders don't trade inflation like they do financial instruments. This makes the pullback more of an economic indicator and it doesn't come from closing long positions. So, don't consider it a chart setup to trade, like buying EUR/USD when it retraces downward for example.
The Euro is hardly changed from the inflation report. However, if CPI starts crawling higher again, that would be the last indicator to point upward for the Euro. Then the ECB (European Central Bank) will be forced to hike interest rates by you know who (Merkel).