EUR: Data should keep the ECB inclined to act – BNPP

By FXStreet FXStreet (Delhi) – Economists at BNP Paribas, expect German preliminary HICP for January to improve to a 0.5% y/y rate from the very weak 0.2% rate recorded in December.

Key Quotes

“A rebound from the unusual decline in food prices reported last month and energy base effects will drive the improvement, but the overall pace of inflation remains too low to be of any reassurance for the ECB, particularly with EUR inflation expectations having shown little reaction so far to last week’s policy signal.

Meanwhile, worsening financial conditions and gains in the EUR effective exchange rate have been taking a toll on business confidence measures, and we expect the European Commission’s sentiment data on Wednesday to show this as well.

Overall, the message from the data is likely to remain that the ECB has work to do still and this should support expectations for more action in March. Elsewhere in Europe, we expect a 0.5% q/q rise in Q4 UK GDP but we don’t think the data will have much impact on BoE expectations.”
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Source:: FX Street