Euro area’s preliminary inflation figures slowdown in October

Euro area’s flash core inflation for the month of October surprised to the downside. Core inflation decelerated below 1 percent year-on-year and confirmed the doves in the European Central Bank. As was already indicated by the German and Spanish inflation figures, the whole of euro area’s inflation decelerated in October. The flash estimates showed that the headline inflation slowed down from 1.5 percent in September to 1.4 percent year-on-year in October.

Energy prices were one of the factors putting breaks on the headline inflation, noted Nordea Bank in a research report. Even if prices rose sequentially, they rose less than one year ago. Core inflation came in at 0.9 percent, causing a downside risk to the core inflation projection which sees core inflation

“Although we have thought the channel from economic growth to inflation to be rusty after the financial crisis, the recent numbers show that inflation is more even fragile than we had assumed”, stated Nordea Bank.

The case is stronger as this was already the second weak month in a row. The weakness in inflation was broad based in Germany. Very subdued core inflation in the euro area causes a downside risk to inflation forecasts.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -49.6831, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 25.7111. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest