German headline inflation accelerates sharply in September

German inflation accelerated unexpectedly in the month of September. On a year-on-year basis the headline consumer price inflation accelerated sharply to 2.3 percent from August’s 2 percent. Consensus expectations were for an unchanged rate of 2 percent. Of this increase, 0.1 percentage points are probably linked to the stronger rise in energy prices compared with the previous year. The other two tenths are linked to the higher core inflation rate, which according to the figures released by Destatis, showed have risen to 1.5 percent from 1.3 percent.

This signifies that the core inflation rate, has returned to its average level of the past one and a half years, noted Commerzbank in a research report. The underlying upward price trend is expected to pick up slowly in the months ahead. Since the start of the year, the negotiating parties in the metal and electrical industries, in the public sector in the construction industry and most recently in the chemical industry have agreed on markedly higher wage agreements, stated Commerzbank. Wages are likely to rise to 3 percent in 2018.

“With today's surprisingly strong data, there is an upside risk for our 1.0 percent core inflation forecast for the euro area (consensus: 1.1 percent), as well as for our 2.1 percent headline inflation forecast (consensus: 2.1 percent)”, added Commerzbank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -95.8695, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 156.856. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex