European Debt Rises After German Inflation and French Election Risk

The cost of borrowing across Europe spiked up Monday as German inflation figures and French elections triggered concern over whether central bank stimulus could be cut short.

Official data from Germany’ statistics office show consumer price inflation across the country has risen 1.9 percent year-on-year, the highest level since July 2013.

It slightly undershot forecasts of a 2.0 percent rise and sent the euro to an 11-day low.

The European Central Bank (ECB) has a core mandate to target inflation at or around 2 percent and any hint of rising prices could pressure the central bank to end its easy monetary policy sooner rather than later.

Jan Randolph, Head of Sovereign Risk at IHS Markit, said in an email Monday that some investors have taken higher inflation in Germany as an excuse to shift out of bonds into equity.

He said the inflation print will add more fuel to the fire of those in Berlin who oppose Quantitative Easing (QE).

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza