Summary:

• Flash inflation in Germany misses forecasts
• EMU GDP data confirm robust growth
• Business surveys in Italy below expectations
• EURUSD inches down but trend remains bullish

Tuesday is important in terms of data releases from the EMU as we had reports on Q4 GDP for the block and flash inflation in Germany. When it comes to the GDP there were no surprises – growth came out at +2.7% y/y which means that bullish expectations have been met. On top of this Spanish GDP was also in line with the consensus at +3.1% y/y. 

German inflation missed expectations in January. Source: Macrobond, XTB Research 

However, inflation numbers – which seem to be especially important for the ECB at present – could be a drag on the euro. German flash inflation was at 1.6% y/y in January, below expectations (of 1.7%). This does not bode well for the EMU reading that we will get tomorrow. President Draghi stressed that although economic recovery is robust, convincing signs of recovery in inflation are yet to show up and indeed that data seems to match his words. This may limit expectations of future rate hikes from the Bank. 

Finally, the Italian January sentiment numbers were weaker as well. Consumer Confidence Index slid by 1 point to 115.5 pts. and Economic Sentiment measure declined from 108.7 to 105.6 pts. 

EURUSD remains well supported despite weaker data. Source: xStation5 

The data mix is hardly positive for the euro but we see that EURUSD has resisted a downturn after exploding from the downward wedge formation in the morning. Bulls are in control as the 1.23 support hasn’t even been tested. Therefore, the data might not be decisive for price action on the chart.