Summary:
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Euro Area headline inflation accelerates to 2.2% while core inflation probably to have risen to 1.1%
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German Finance Ministry backs up a steep increase in minimum wage
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Euro eyes 1.13 following the data
Headline inflation in the Eurozone accelerated to 2.2% in October in annual terms, up from 2.1% seen in September. According to Eurostat estimates core inflation rose to 1.1% from 0.9% suggesting that domestic-driven inflationary pressures are slightly building up. This seems to coincide with the latest wage data offered by the Eurostat as well - we touched on this topic last week in our recommendation regarding the EURUSD. The details presented today showed that energy prices rose probably 10.6% whereas services increased 1.5% in annual terms, the quickest pace of growth since May. We also got the data regarding the unemployment rate in the Eurozone which held at 8.1% in September.
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Euro Area headline inflation sped up in October. According to Eurostat forecasts core prices saw an increase as well. Source: Macrobond, XTB Research
Earlier today we got the disappointing retail sales data from Germany for September where sales dropped 2.6% in annual terms clearly missing the consensus of a 0.9% increase. As far as German manufacturing is concerned one needs to be aware that a lot of badness we have seen of late has been assigned to the automotive sector. It’s believed that this sector was not properly prepared for new carbon emission standards which took effect on September 1. This is confirmed in industrial production data - output does not look so dismally when we exclude this sector.
Last but not least, the German Finance Ministry agreed on Wednesday to advocate an increase of the national minimum wage by 35 cents to 9.19 EUR per hour since the next year. The wage will be then lifted to 9.35 EUR from 2020 onwards. The Federal Statistics Office said that roughly 1.4 million people received the minimum wage in April last year. Now it’s believed that around 2 million people could benefit from this decision.
The 1.13 level looks as the line in the sand for euro bulls. A breakdown of this level could trigger a lot of stop loss orders resulting in a quick move to the downside. Source: xStation5
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