The Euro’s move above 1.50 was supported by German economic data early this morning, as inflation pressures proved to be stronger than expected while consumer confidence held steady.
Indeed, the German import price index jumped 0.8 percent in January from the month prior, pushing the annualized rate up to 5.2 percent - the highest since August 2006. The gains aren’t entirely surprising given the sharp rally in crude oil early in the month and broad strength in orther commodity prices. Meanwhile, the initial estimate of the GfK index of consumer confidence in March unexpectedly held steady at 4.5, with a breakdown of the report showing an improvement in income expectations and deteriorations in consumers’ economic outlook and willingness to buy. Overall, the figures will not be comforting to the European Central Bank, as inflation remains a problematic issue. However, given today’s GfK release and the recent ZEW and IFO reports, it appears that sentiment has remained somewhat resilient as a stabilization in the financial markets has calmed jittery nerves. As a result, the ECB is even more likely to leave rates steady throughout the first half of 2008, barring a sharp drop in inflation or severe tightening of the European credit markets.
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