The euro falls on data showing that German consumer prices contracted more than analysts expected in April, contracting to negative .2 percent from .3 percent. Expectations were a drop to negative .1 percent for Germany’s preliminary consumer price index (CPI) month-over-month.
Inflation, calculated by a harmonized European Union method, rose from 1.1 percent from .9 percent in March, according to data from the Federal Statistics Office. Analysts were looking for an increase to 1.3 percent. “Inflation numbers from Germany, as the region’s largest economy, are an early indication for the euro area,” said Jens Kramer, an economist at NordLB.
As consumer prices continue to contract along major eurozone economies, European Central Bank (ECB) President Mario Draghi is a staunch believer that there are no deflationary pressures, while trending inflation data is leading to a different outlook. Eurozone inflation currently stands at a meager .5 percent, and tomorrow’s flash CPI year-over-year data could be the trigger for ECB action. Expectations are that inflation will tick up .3 to . percent, but that is unlikely given the recent data.
EURUSD fell to 1.3810 on the data after lingering in the supply zone at 1.3875/80 on the 4H chart. US consumer confidence will be released at in a few hours, and a positive number could add fuel to dollar strength and push the pair to 1.3800/05 where the 200 EMA resides. Lower support can be found at 1.3785/90. A pullback would see resistance at 1.3865.