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Prior +3.4%HICP +3.5% vs +3.5% y/y expectedPrior +3.4%There is a little bit of good news here as Spanish headline annual inflation comes in softer than estimated. That being said, the EU-harmonised reading did reflect a jump to 3.5% from 3.4% in the month before. So, one can argue that it is a bit mixed.However, at least core annual inflation is seen pushing down a little to 2.8%. And that is softer than the 2.9% estimate seen in March previously. That being said, it still marks a notable increase in recent months with core annual inflation having been around 2.3% to 2.4% in the middle of last year.Overall, the ECB still cannot rest on its laurels. Headline inflation is keeping higher and is expected to pick up further. And in turn, higher energy prices are expected to feed through to other parts of the economy in due time. That especially as the US-Iran conflict prolongs further.But all things considered, I’m not a fan of central banks using monetary policy to fight back against supply shocks. So, the ECB definitely has their work cut out for them as they look to navigate through this landscape.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
Spanish inflation data just came in slightly softer than expected, but there’s a catch: the EU-harmonised rate ticked up to 3.5%. For traders, this mixed bag of inflation signals could create volatility in both the forex and equity markets. Softer headline inflation might suggest a less aggressive ECB stance, but the uptick in the harmonised reading could keep pressure on the euro. Look for potential reactions in EUR/USD, especially if it tests key support levels around 1.05. If the euro weakens, it could also impact commodities priced in euros, like oil and gold. Here’s the thing: while the headline number is a relief, the underlying trend shows inflation isn’t going away. Traders should keep an eye on upcoming ECB meetings and any shifts in market sentiment that could arise from this data. Watch for how the market reacts in the next few days, as a sustained move below 1.05 could signal further weakness for the euro.
📮 Takeaway
Monitor EUR/USD closely; a drop below 1.05 could indicate further euro weakness amid mixed inflation signals.
