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Prior +0.8%HICP +0.4% vs +0.4% y/y prelimPrior +0.7%No changes to the initial estimates as French inflation continues to keep on the lower side, helping to somewhat balance out the higher price pressures in the German and Spanish economies especially.Core annual inflation is also continuing to moderate, dropping to 0.7% in January – down from 1.1% in December last year. That as services inflation falls further to 1.7%, down from 2.1% in the month before. However, food price inflation accelerated slightly to 1.9% – up from 1.7% in December. So, there is a bit of a mix there with the prices of manufactured products seeing a marked decline of 1.2%.The overall chart:All in all, this won’t offer much change to the ECB outlook for now. That unless we start to see a material shift in price pressures in Germany in the months ahead. Then, the softer French numbers here could be a push for a final set of rate cuts before the year is over and done with.For now, it’s all conjecture though. We can only wait and see to scrutinise the developments to come.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
French inflation data shows moderation, and here’s why it matters for traders: With HICP at +0.4% y/y and core inflation dropping to 0.7%, this signals a potential easing of monetary policy in the Eurozone. Lower inflation in France could offset the higher pressures seen in Germany and Spain, creating a more balanced economic outlook. For traders, this could mean a shift in the ECB’s stance, especially if inflation trends continue downward. Watch for any comments from ECB officials regarding interest rates, as they could impact the euro’s strength against the dollar and other currencies. However, don’t overlook the flip side—if inflation in other major economies remains stubbornly high, it could lead to a divergence in monetary policy that favors the dollar. Keep an eye on the EUR/USD pair, particularly if it approaches key support levels. If it breaks below those, we might see increased selling pressure. Monitor the upcoming economic releases closely; they could provide further clarity on the inflation trajectory and influence market sentiment significantly.
📮 Takeaway
Watch the EUR/USD pair closely; a break below key support levels could signal increased selling pressure amid diverging inflation trends.
