German Import prices printed hotter than expected pushing EUR/USD towards the 1.3800 level in early morning European session on the first trading day of the week. German import prices rose 1.5% versus forecasts of 1.1% indicating that inflationary pressures in Eurozone’s largest economy show no signs of easing. On a year over year basis prices rose 11.8% - lower than the previous period’s 12.4% increase - but still higher than market expectations of 11.2%.
The rise in import costs is likely to translate into higher PPI readings due on Wednesday which could put additional pressure in ECB authorities to tighten monetary policy in the near future as inflationary risks continue to escalate. The increase in import prices was no doubt caused by higher energy costs and given the ongoing geo-political tensions in the Middle East that trend is likely to persist creating the possibility of second round effects throughout the EZ economy.
EUR/USD firmed in the aftermath of the news rising to a high of 1.3785 after trading as low at 1.3715 at the start of the Asian session. The pair was pressured at the start of the week’s trade by the results from the Irish election over the week-end which revealed massive voter dissatisfaction with the EU bailout of Ireland, as newly elected officials promised to renegotiate the terms of the deal. However, positive risk appetite in equity markets helped to lift EUR/USD off its lows and the pair has steadily traded higher into the European open. With no other economic data on the EZ calendar for the rest of the day, the euro is likely to take its cue from equity markets and if risk appetite remains positive, the pair could make a run towards the 1.3800 level as interest rate hike expectations continue to support the unit.
The rise in import costs is likely to translate into higher PPI readings due on Wednesday which could put additional pressure in ECB authorities to tighten monetary policy in the near future as inflationary risks continue to escalate. The increase in import prices was no doubt caused by higher energy costs and given the ongoing geo-political tensions in the Middle East that trend is likely to persist creating the possibility of second round effects throughout the EZ economy.
EUR/USD firmed in the aftermath of the news rising to a high of 1.3785 after trading as low at 1.3715 at the start of the Asian session. The pair was pressured at the start of the week’s trade by the results from the Irish election over the week-end which revealed massive voter dissatisfaction with the EU bailout of Ireland, as newly elected officials promised to renegotiate the terms of the deal. However, positive risk appetite in equity markets helped to lift EUR/USD off its lows and the pair has steadily traded higher into the European open. With no other economic data on the EZ calendar for the rest of the day, the euro is likely to take its cue from equity markets and if risk appetite remains positive, the pair could make a run towards the 1.3800 level as interest rate hike expectations continue to support the unit.
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