Euro is Day’s Best-Performer as Eurozone Core Inflation Jumps

The Euro outperformed its major rivals following the release of data that showed a key measure of prices in the Eurozone was riding steadily towards the ECB's target level.

Less than 24 hours earlier the Euro fell in the wake of this week’s European Central Bank event in which ECB President Mario Draghi stressed his team would only consider raising interest rates and ending its money-printing programme once signs of concerted inflation growth becomes entrenched.

The shared currency has however reversed and gone higher after the release of data showing Draghi might have to soon act and implement policies that will benefit the Euro.

Eurostat reports that Eurozone core inflation - the inflation print that really matters for the ECB - closed in on a four-year high of 1.2%.

Markets were anticipating core inflation to read at 1.0% so this is a comfortable beat of expectations.

“While that’s still a decent whack away from the ECB’s targets, it was enough to satisfy the euro, which took 0.2% off the Pound and half a percent off of the Dollar,” says analyst Connor Campbell at Spreadex in London.

The below snap-shot shows that the Euro is today’s best-performer with the next 20 largest currencies all giving up ground:

The all-item HICP inflation reading rose to 1.9%, a beat on the 1.8% expected. This is higher than the core read as it contains a big jump in energy prices; something the ECB tends to look through.

Rather, the ECB is concerned with core inflation as this is more representative of those price pressures being generated by wage pressures and are thus a good indicator of long-term inflation levels and underlying economic performance.

“The news was taken with gusto by the market because it minimises the possibility of any additional QE by the ECB,” says Boris Schlossberg, Director of BK Asset Management in New York. "Although the rise was modest it proved to be a major catalyst for a Euro rally as the pair spiked 40 points in the aftermath of the release."