THE TAKEAWAY: [German Consumer Price Index dropped 0.5% in January] > [Fundamental problems in Euro-zone make it harder for companies to raise commodity prices] > [EURUSD Bearish]
German preliminary Consumer Price Index in January decreased 0.5 percent following an increase in last month according to a report released by Germany’s Federal Statistics office in Wiesbaden today. The consensus forecast of economists surveyed by Bloomberg News had called for 0.4 percent drop in January. On a yearly basis, German inflation grew 1.7 percent in this month, falling short of expectations for an increase of 2.0 percent.
The low-than-expected inflation readings indicate that the euro area still faces fundamental problems such as the ongoing debt crisis and thus it is a long way for the Euro-area to recovery. According to the IMF, the Europe economy will shrink by 0.2 percent in 2013. Cautions lie in the gap between financial-market optimism and economy reality which may pull the euro back from its current peak.
EUR/USD 1-minute Chart: January 31, 2013
Chart created using Market Scope – Prepared by Renee Mu
In the minutes following the release of the German CPI report, the euro weakened slightly against the U.S. dollar. At the time of this report, the EURUSD pair trading at $1.3551.
--- Written by Renee Mu DailyFX Research