Published on 10.02.2023 15:27

The Euro remains under pressure in today’s trading session against the US dollar after lower-than-expected inflation figures yesterday raised expectations that the European central bank may ease up on the pace of their latest interest rate hiking cycle.

Inflation in Germany, Europe’s biggest economy dropped to 9.2 percent in January from 9.6 percent in December according to preliminary data released by the German statistics office on Thursday which was an increase of 0.5 percent compared to Decembers figures.

The figures were lower than expectations as analysts had generally expected inflation to rise by 10.0 percent compared to January 2022 and by 1.2 percent compared to December.

The ECB has been embarking on an aggressive rate hiking cycle over the last several months to bring down record inflation and the latest CPI numbers from Germany show that the ploy may be working but not everybody is convinced, and some analysts advise to sit on the sidelines for further confirmation of declining inflation figures before making any moves.

Anyone who takes this as an opportunity to warn the European Central Bank against further interest rate hikes suffers from a distorted perception,” said ZEW economist Friedrich Heinemann

 “Even the drop in inflation that can be expected from now on does not change the fact that the ECB is still well short of its two percent target.” He added.

Looking further ahead today, the main drivers of the EUR/USD currency pair will be a monetary speech by Isabel Schnabel who is a member of the European Central Bank's executive board and will lay out the monetary policy path of the ECB moving forward.

 During the American session market participants will await the release of the Michigan consumer sediment index from the US, which is expected to hit the market at 65, slightly above last month’s figure of 64.9 and if analysts are correct, the news id not expected to create much volatility in the currency pair.


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