Euro edges higher, German CPI unchanged

  • German inflation dips to 6.1%

The data calendar is light on Friday and EUR/USD is trading at 1.0707 in Europe, up 0.09%. There are no tier-1 events out of the eurozone or the US, which means we can expect subdued movement from the euro for the remainder of the day.

The euro is poised to record a losing week for an eighth straight time. The euro has plunged about 500 points during that time, as the US dollar thrives over concerns that the Fed may have to keep hiking in response to the resilient labour market. The currency continues to struggle at 3-month lows and there aren’t any encouraging signs that the downturn is about to change.

The economic outlook in the eurozone remains weak. Recent eurozone numbers have been soft and Germany hasn’t resembled the locomotive which could always be trusted to lift the eurozone economy. German PMIs pointed to contraction in the services and manufacturing sectors in August, and today’s inflation report was a reminder that the largest economy in Europe is grappling with high inflation and weak growth.

German CPI remained unchanged in August for a third straight month. On a yearly basis, CPI was confirmed at 6.1% y/y, down a notch from 6.2%, while core CPI remained unchanged at 5.5% y/y. Food and energy prices rose but there was a bit of good news as services inflation ticked lower to 5.1%, down from 5.2% in July.

The ECB meets next week and it remains unclear what Lagarde & Co. will decide. Inflation, which is at 5.3%, remains much higher than the ECB target of 2%. The ECB wants to lower inflation but further rate increases could tip the weak economy into a recession. The markets have priced in a pause at the September meeting at around 70%, which means that a rate hike still remains on the table despite weak economic conditions.

.

EUR/USD Technical

  • EUR/USD is testing resistance at 1.0716. Above, there is resistance at 1.0831
  • There is support at 1.0658 and 1.0593

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.