Producer prices in Germany increased 0.5% in August, topping expectations for a 0.2% rise, with the annual rate of inflation falling 6.9% from the previous year. The breakdown of the report showed energy prices jumped 1.1% during the month, with the cost of heating oil advancing 11.2%, while prices for basic goods rose 0.5% from July. At the same time, the Euro-Zone Current Account surged EUR 6.6B seasonally adjusted in July after falling 4.3B in June, with the flows of goods and services increasing for the second month. The data reinforces an improved outlook for the region as policy makers take unprecedented steps to stem the downside risks for growth and inflation, and the European Central Bank is likely to hold a neutral policy stance going forward as price pressures pick up. As the central bank raises its economic outlook, long-term expectations for higher interest rates may continue to drive the euro higher over the near-term as market participants speculate the ECB to tighten policy over the next 12 months.
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