Softer Data From the Eurozone Will Keep the ECB Dovish
Eurozone GDP and inflation looked OK at first glance, but details show a weaker picture
This morning we had the prelim reading for the Eurozone GDP and CPI (consumer price index) inflation. The headline CPI reading looked good, but looking at the details, it’s not so good. The GDP report is not so good either, leaning more on the soft side. Below are both reports:
- Eurozone January preliminary CPI +1.4% vs +1.4% y/y expected
- November stands unchanged at +1.3%
- Core CPI +1.1% vs +1.2% y/y expected
- Prior +1.3%
You can pretty much ignore the headline reading; core CPI is what really matters and despite the tick higher in headline CPI to 1.4%, core CPI shows a drop once again to start the year. This will add to the headache for policymakers at the ECB as inflation is still far away from their target at the moment.
- Eurozone Q4 preliminary GDP +0.1% vs +0.2% q/q expected
- Prior (Q3) +0.2%; revised to +0.3%
- GDP +1.0% vs +1.1% y/y expected
- Prior (Q3) +1.2%
After the negative GDP readings from Italy and France which showed a contraction in Q4 of 2019, this just reaffirms that the euro area economy pretty much encountered stagnation in the final quarter of last year. For now, the hope is that 2020 will deliver better expectations, but we’ll have to wait and see on that. This will keep the ECB dovish and EUR/USD bearish for some time to come.
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