Germany’s statistics agency, Destatis, is set to publish the CPI data on Thursday, with Headline CPI expected to rise by 2.1% YoY in August. The upcoming Harmonized Index of Consumer Prices (HICP) inflation data from Germany will be crucial in influencing the European Central Bank’s (ECB) policy decisions at its next monetary policy review meeting.
The Euro (EUR) may face a reversal in its recent uptrend against the US Dollar (USD) if the inflation data from Germany and other Eurozone economies suggests a persistent disinflationary trend.
What to Expect from the German Inflation Report?
Destatis will release the official data on Thursday, with the German Consumer Price Index (CPI) projected to rise by 2.1% YoY in August. The Harmonized Index of Consumer Prices (HICP) is expected to drop to 2.3% YoY in August.
If inflation in Germany continues to cool, it could indicate softer inflation readings for the entire Eurozone, which will be published on Friday.
The ECB’s decision on interest rates in September remains uncertain, with comments from policymakers suggesting a cautious approach towards easing monetary policy.
Potential Impact on EUR/USD
The preliminary HICP inflation report for Germany is scheduled for release at 12:00 GMT. A better-than-expected inflation data could support the Euro and lead to a continuation of the uptrend in EUR/USD.
On the other hand, a negative surprise indicating a disinflationary trend could weaken the Euro and result in a reversal to lower levels.
Analysts believe that as long as EUR/USD remains above key support levels, the bullish bias is likely to persist.
Overall, the German inflation data release will provide insights into the ECB’s future policy decisions and could impact currency markets, especially the EUR/USD pair.