Euro Traders Ignore ECB Warnings on Release of Lower German Inflation

Talking Points:

• German inflation the lowest in 3-years in March
• ECB members warn of action to prevent deflation
• EUR/USD pops 25 pips to a daily high

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Annual German inflation fell to a 3-year low in March, but the news didn’t stop the Euro from rallying about 25 pips against the US Dollar at the time of the release. Before the release of the country’s inflation rate, regions throughout Germany had already reported lower regional March inflation rates earlier this morning. Therefore, it is possible that the weaker German inflation rate was already expected by many traders by the time of the release.

Euro-zone inflation is likely the most important data release for Euro traders at the moment because of recent comments by various ECB members. Earlier this week, ECB’s Makuch warned that the central bank is preparing measures to avoid a deflationary environment. Therefore, lower inflation may push the ECB to take to take even looser monetary policy. That’s why the Euro rally on lower than expected German inflation may have caught many traders by surprise.

EUR/USD 1-Minute: March 28, 2014

The Euro rose to a new daily high against the US Dollar after setting a monthly low earlier today at 1.3704. Currency Strategist Ilya Spivak points out that EUR/USD has broken below rising channel support and next support lies at 1.3721.

Chart created by Baruch Spier using Marketscope 2.0. Add DailyFX Support/Resistance to your charts at FXCM Apps.

-- Written by Baruch Spier, DailyFX Research. Feedback can be sent to [email protected] .