EUR and GBP: Inflation is not an assistant to the European currency. The pound remains under pressure after S & P claims
If, in the first half of the day, the buyers of the European currency kept at least some hope of recovering the EUR / USD pair, then the inflation report put everything in its place, returning risky assets to a further fall against the US dollar.
Inflation data in France and Italy, albeit preliminary, hurt the euro.
According to the report, the preliminary CPI of France for October of this year increased by 0.1% compared with September and by 2.2% on an annualized basis. Economists had forecast that France’s preliminary CPI for October would increase by 0.2% and 2.2%, respectively. Harmonized by EU standards, annual inflation remained unchanged at 2.5%.
In Italy, the preliminary CPI in October remained unchanged from September, while economists expected a rise of 0.3%. Compared to the same period in 2017, inflation rose by 1.6%, also being below the forecast of economists, who expected growth of 1.7%.
Weak inflationary growth in leading European countries may force the ECB to think about the timing of interest rate increases next year, as it is already clear that there is no particular need to rush to make changes in monetary policy based only on inflation data.
As for the eurozone, according to the EU Statistics Agency, the annual inflation rate remains above the target level of the Central Bank, which is slightly less than 2%. As noted in the report, the annual increase in consumer prices in the eurozone in October 2018 was 2.2% versus 2.1% in September.
As before, the main increase in prices was directly related to the rise in prices for energy carriers, while the annual core inflation rose only to 1.1% versus 0.9% in September.
Yesterday’s preliminary data on the eurozone’s GDP growth rates, together with today’s inflation data, point to “alarm calls” for the economy. This may cause the ECB to continue to be cautious, putting the traders in even greater uncertainty and putting pressure on the euro due to the fact that the rate increase may be postponed until a later date.
The report on the labor market in the eurozone did not change the balance of power. According to the European Bureau of Statistics, the number of unemployed in September 2018 increased by 2,000 compared with August. The unemployment rate remained unchanged at 8.1%.
The British pound continues to experience problems after the publication of the report of the rating agency S&P, which explicitly states that if an agreement on Brexit is not reached, this could lead to a recession in the UK, which will lower its sovereign rating.
From the fall of the pound into the abyss hold only the expectations of economists and investors who believe that the UK and the EU will conclude and ratify the agreement on Brexit.