Flash CPI data for March from the euro area was released today at 10:00 am BST. Report was expected to show an acceleration from 5.8 to 6.7% YoY but instead showed a jump to 7.5% YoY! On the other hand, core gauge jumped from 2.7% to 3.0% while the market expected an acceleration to 3.1% YoY. This discrepancy between jump in headline and core inflation measures show that current inflation is mostly driven by volatile items, like food and fuel. Nevertheless, it will pose a challenge for the European economy and there is a high chance that energy prices will increase further amid EU-Russia spat on natural gas.
Market reaction was rather insignificant with EURUSD dropping less than 0.1% in the first few minutes after the release. The 1.1040 support zone remains a key near-term target for sellers.
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Source: xStation5
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