Eurozone with an inflation

Inflation in the eurozone has appeared. According to the latest data, inflation in euro countries, for the first time in more than a year, is above the ECB's target. At the same time, the main consumer price index is still growing at a slow pace.
Inflation in the euro area amounted to 2% yoy, against a background of 1.9% last month. Without taking into account volatile food and fuel prices, inflation in the euro area is 1%. This is a slowdown in last month growth, when the rise in the core CPI was 1.1%.
High oil prices are expected to continue to exert upward pressure on growth in euro area goods and services prices.
At the same time, the key consumer price index is expected to grow at an accelerated pace in the second half of the year.
Against the background of widespread wage increases in the euro area, investors and analysts do not expect any major surprises in the upward direction.
The euro initially rose against the dollar after data, adding 0.1% to its value to 1.1656 dollars. Subsequently, however, the single currency returned some of the earned, returning to levels below 1.1650.

Bad news from Germany continue

Bad news related to the German economy just can not stop. The latter were related to industrial production and went out today. Industrial production in Europe's largest economy has seen a surprise decline in April.
Against the backdrop of the projected 0.3% rise, the indicator fell 1%.
These figures, coupled with the downgrade in factory orders in Germany earlier this week, indicate the potential problems the German economy may face.
Industrial production in the second largest European economy - the French one - also fell in April.
The euro fell after bad data from Germany and France, losing 0.2% of its value to 1.1772 against the dollar. Yesterday the single currency traded at levels above the psychological limit of 1.1800.
Other data from the eurozone also indicate a slowdown in the growth of the European economy. This may well be a factor in the ECB's next week's decision and postpone the announcement of the end-of-term of incentives from the European Central Bank.

German economy in great shape

The German economy reported a 0.6% growth in its GDP in the third quarter. This was accelerating the rise in the economy compared to the second quarter of the year. The result responded to the average market expectations.
At the same time, the growth of Italy's economy also rose to 0.5%, according to the forecast.
All this leads investors to expect that the eurozone economy will maintain its robust growth performance since the beginning of the year and in the third quarter.
The data triggered an increase of the euro against other major currencies. The single currency returned to more than 1.1700, trading on peaks at 1.1720 levels. The rise in the euro, after the results, amounted to 0.4%.
The ECB, of course, did not miss the opportunity to underline its function of the observed growth, saying that the measures taken to repurchase assets began to produce its results and was "extremely successful", according to vice-president Vitor Constanceo.
Now, investors are rising expectations that the ECB will resort to further action to normalize its monetary policy at upcoming meetings.

The ECB kept interest rates, cutting its inflation forecasts

The ECB, as expected, kept the interest rate at 0%. The bank, however, has removed its comments for further interest rate cuts and said it will continue with its bond repurchase program.
In his statement, Draghi said interest rates are expected to remain at their current levels for an extended period of time, but added that he would be ready to extend the buy-back program if needed.
The speculation led to a momentous depreciation of the euro as the single currency declined to 1.1200 against the dollar after it had previously exchanged at 1.1240 levels.
Mario Draghi also said the ECB considers risks to the ECB's economy as "broadly balanced".
That he did by revising the financial institution's downward inflation expectations. The main reason for this is the cheaper oil, which will most likely continue to weigh above the growth in consumer prices.
The ECB is currently expecting an inflation rate of 1.5% this year, 1.3% next year and 1.6% in 2019. This is a decline compared to the March forecast for inflation of 1.7% this year, 1.6% in the next and 1.7% in 2019.

The business activity in the Eurozone in January has stabilized

In January the business activity in the private sector of the Eurozone maintains solid pace of growth since the end of 2016. These are the final results of agency Markit's research.
PMI index, which measures general business activity, remained in December at level of 54.4 points, holding for a second consecutive month in five and a half years peak against the forecast for a slight decrease to 54.3 points. Thus, the business activity remains in the expansion for 43 consecutive months.
PMI index, which measures only the activity in the services sector also stabilized in January at the December level of 53.7 points. Earlier this week Markit agency reported good growth in industrial PMI index in January to 69 month high of 55.2 points compared to 54.9 points a month earlier.
Latest PMI data meet the GDP growth of the euro area by 0.4% q/q, suggesting that the region's economy is on a solid foundation in early 2017, analysts say. At the same time, faster growth of new business and the upturn in business confidence for the last 12 months to the highest level since the eurozone debt crisis is a good sign that a relatively good pace of growth will persist in the coming months.

Mario Draghi hinted at upcoming additional stimulus measures

Eurozone economic recovery remains heavily dependent on stimulus measures taken by the European Central Bank, said on Friday the ECB President Mario Draghi, hinting that the bank is likely to extend the program of "quantitative easing" for a total of 1.7 bln euro at its next meeting, which will take place on 8 December.
"We still can not cancel our vigilance", - said Draghi on a banking conference in Frankfurt, adding that the ECB will continue to act as justified by using all the tools that are available, while inflation did not grow sustainably.
He warned that central bankers do not yet see consistent strengthening of basic dynamics of prices and said that the ECB is committed to comply substantially the policy of monetary stimulus.
Central bankers from the ECB are preparing for quite a crucial meeting on December 8, which is expected to decide whether to extend the program of "quantitative easing." At this stage, the program should be completed at the end of March 2017.
By purchasing bonds, the ECB hopes to reduce real interest rates in the euro area, thereby encouraging lending, economic growth and inflation, analysts say. Despite these efforts, inflation in the region last month rose by 0.5% and remained still too far below the target of the ECB from just under 2%.

German Ifo business climate fell unexpectedly in August

German business confidence registered an unexpected deterioration in August, falling to a four-month bottom, showed data today.
In the report, the German research Ifo institute said, that the business climate fell to a seasonally adjusted 106.2 points this month from 108.3 in July, which did not match the forecasts for an increase to 108.5 points.
The index of current conditions fell to 112.8 points in August from 114.8 points a month earlier, which was revised from 114.7 points. Analysts had expected the index to 114.9 points.
The index of business expectations, which measures attitudes towards business prospects over the next six months deteriorated to 100.1 points this month from 102.1 in July, compared with forecasts for 102.5 points.
The monthly index is based on a survey of about 7,000 German companies in manufacturing, construction, wholesale and retail.

EUR/USD is rising on the positive data on GDP growth in the eurozone

On Friday, the euro was higher against the US dollar after the release of eurozone economic growth data in line with expectations, as well as with the report on industrial production, which exceeded forecasts.
During the European morning trade, EUR/USD reached 1.1159, the session high; the pair subsequently consolidated at 1.1150, rising by 0.12%.
The pair was likely to have a support at 1.1066, the low of August 9 and resistance at 1.1194, the high of Thursday.
Eurostat reported, that the eurozone GDP increased by a seasonally adjusted 0.3%, coinciding with the rate of increase in the previous quarter and the consensus forecasts.
In annual basis, GDP growth is by 1.6% in the second quarter, coinciding with the rate of increase of the first three months of the current year and the forecasts.
Eurozone data were published after Germany, the leading economy in the region, surprised the market participants with its performance of economic growth - 0.4% instead of the expected 0.2%.
A separate report showed, that the industrial production in the eurozone rose by 0.6% in June, beating forecasts for increase of 0.5%, after falling by 1.2% the previous month.