Inflation data of Germany and France was released at the beginning of today’s European session. It became known that retail sales in Germany for August dropped compared with July (-0.4 per cent) and rose sharply compared with August 2015 (+3.7 percent). The level of personal consumption in Germany remains highs, due to support of the strong labor market and growth in wages.
Consumer price index (CPI) in France rose by 0.4% in September compared to the same period last year. Harmonized index of consumer prices (HICP) in France rose by 0.5% in September compared to the same period last year after the rise of 0.4% in August.
At 12:00 (GMT+3) today, similar Italian indices will be presented. Note that Italian economy is the second largest in the Eurozone after the German. It is expected that Italian consumer price index (CPI) for September will rise by 2.0%.
At the same time (12:00 GMT+3), preliminary annual index of consumer prices in Eurozone for September and European unemployment rate for August (forecast is 10.0%) will be released.
Consumer price index is a key indicator of the inflation rate. The ECB considers this index for making its monetary policy decisions.
Eurozone faces a threat of deflation. According to the forecast, deflation may grown by 0.4%. Any deviation to this forecast will cause a surge of volatility both in the Euro and European stock indices.
The pair EUR/USD has been declining since the opening of today’s trading day, due to the rise in the USD in the market. The Euro is also negatively affected by the decline of the pound in the cross-pair EUR/GBP.
At 11:30 British GDP for Q2 will become known. Forecast for the British GDP is +0.6%.
If the forecast proves to be correct, the Pound and the pair EUR/GBP will receive support, but pressure on the Euro will increase.
Support level of the pair EUR/USD is at the level of 1.1180 (see "Technical analysis")
Further decline of the pair is not expected today.
It is necessary to consider that today is the last trading day of the week and the month, and traders may not wish to open new positions or leave open positions.