EUR flows: Mild EUR/USD upside risks on German CPI
EUR/USD has bounced from the lows and may gain some support from German CPI data
Services Inflation Persistence Less Evident?
Source: German Federal Stats Office, CE, % chg y/y
German CPI will be the main focus today, with the consensus expecting a modest uptick in the y/y rate in December. We see the core down a further 0.1 ppt in the preliminary December data but where energy base effects may pull the headline y/y rate up to 2.6%, a move already flagged in this month’s Spanish CPI data. It is doubtful that this will have much FX impact, as it will take a lot to deflect the market from expectation of a 25bp ECB rate cut at the next 3 meetings. But if anything it might provide some support for EUR/USD, which has bounced a little over the last few sessions and looks a little extended on the downside relative to yield spreads
