- Annual inflation in Germany dropped to 2% in June from 2.1% in May.
- EUR/USD remains in the daily range slightly above 1.1700.
Inflation in Germany, measured by a change in the consumer price index (CPI), fell less to 2% in June from 2.1% in May, Flash Destatis estimates showed on Monday.
Every month, CPI remained unchanged, compared to market expectations for an escalate of 0.2%.
The harmonized indicator of consumer prices in Germany, preferred by the European Central Bank, fell to 2% per year after a height of 2.1% in May. This reading appeared below the estimates of analysts of 2.2%.
Market reaction
These numbers do not seem to have a noticeable impact on the valuation of the euro. During the press, EUR/USD He was practically unchanged at 1.1715.
Frequently asked inflation questions
Inflation measures the escalate in the price of a representative basket of goods and services. Header inflation is usually expressed as a percentage change based on month to month (Mom) and year on year (Yoy). Basic inflation excludes more unstable elements such as food and fuel, which can change because of geopolitical and seasonal factors. Basic inflation is the number of economists focus on the level of central banks, which are authorized to maintain inflation at a management level, usually about 2%.
The consumer price indicator (CPI) measures the change in the prices of the basket of goods and services over time. This is usually expressed as a percentage change on the basis of month to month (Mom) and year on year (Yoy). Core CPI is a number directed by central banks because it excludes unstable food and fuel cartridges. When Core CPI increases above 2%, it usually causes higher interest rates and vice versa when it drops below 2%. Because higher interest rates are positive for currency, higher inflation usually causes a stronger currency. On the contrary, it is true when inflation falls.
Although this may seem contrary to intuition, high inflation in the country increases the value of its currency and vice versa for lower inflation. This is due to the fact that the central bank usually raises interest rates to combat higher inflation, which attracts more global influx of capital than investors looking for a lucrative place to park their money.
Earlier, gold was investors of assets, to which he turned to high inflation, because it retained its value, and although investors often buy gold for his protected real estate in times of extreme market riots, this is not the most of the time. This is because when inflation is high, central banks set interest rates to combat it. Higher interest rates are negative in the case of gold because they escalate the costs of having gold in relation to assets on interest or place money on the cash deposit account. On the other hand, lower inflation is positive for gold because it lowers interest rates, thanks to which brilliant metal is a more profitable investment alternative.
