Busy day for investors, where inflation reports from major economies
were released, showing that prices accelerated in the month of
December amid debt woes that continues to influence traders and
investors.
*German Inflation Accelerates the most in two years*
German Federal Statistics Office report for Consumer Price Index
showed that prices surged to the fastest pace in more than two years
last month, driven by the rise in commodity prices.
Inflation in Germany, measured by the harmonized European method, rose
by 1.9 percent, which comes in line with market expectations and the
previous reading. On a month-on-month basis, the index rose by 1.2%,
meanwhile the monthly CPI index rose by 1.0 percent, while the yearly
CPI index rose by 1.7%. All figures matched the previous and the
expected by markets.
The German economy has been driving the recovery process in the
region, where companies stepped up hiring, bringing unemployment to
the lowest level in almost 20-years.
The Statistics office noted on December 29 that 2010 inflation levels
was "driven by price rises in light heating oil and fuels, as well
as in fruit and vegetables."
*UK producer Prices*
UK Producer Prices unexpectedly rose more than market's median
estimates last month, reaching 0.5 percent, from November's figures
of 0.4 percent; the Office of National Statistics said today, due to
the rising cost of food and energy prices where food prices jumped the
most in more than two years.
The report puts more pressure on the BoE to contain inflation in the
country, where the bank preserved its monetary stance for the
22-consecutive month, keeping rates at 0.50 percent and APF purchases
at 200.0 billion pounds.
The Center for Economic and Business Research (CEBR) said today the
British economy faces 20.0% chance of falling back into recession, on
rising unemployment and accelerating inflation levels that continue to
affect the ability of the economy to recover.
Britain's economy will grow by 1.1 percent in 2011, according to
CEBR, down from the previous estimates of 1.3 percent that was
projected in October. CEBR economist Scott Corfe said that the reason
for the revision is "persistently weak labor-market indicators and
large rises in consumer prices," where he added that "It is
difficult to see where significant growth will come from given that
domestic demand is likely to be weak."
CEBR also projects that the BOE will expand its APF purchases,
depending on the drop of inflation that currently stands at 3.3
percent, which is higher than the government's upper limit of 3.0
percent.
CEBR estimates for 2010 growth levels are set at 1.8 percent, while
the economy to expand in 2012 by 1.5, as for inflation, the group
projects that inflation would spike at 4.0 percent this year, before
dropping to 1.6 percent by the second half of 2012.
*Euro Zone Inflation levels*
Trichet noted yesterday during the press conference that was held
after the rate decision that inflation outlook has tilted to the
upside over the short-term, while remaining relatively anchored over
the medium-term.
The Core CPI index in the euro-zone showed that prices rose by 1.1 in
the month of December, in line with the previous and the expected.
Meanwhile, the CPI index rose by 0.6% over the monthly basis as
expected, from November, where it rose by 0.1%. on the yearly scale
the index rose by 2.2%, this is compared with the previous revised 1.9
percent.
The report place huge pressure on the ECB; where Trichet noted
yesterday that the bank will not hesitate to increase interest rates
in order to contain inflation threats, which would tamper the recovery
process.
The IMF released a statement today, discussing the debt woes that
currently sweeping through Europe, where Naoyuki Shinohara, Deputy
Managing Director at the IMF said that "At least for now it looks
like the spillover from the European sovereign crisis to areas outside
of the region will be limited," adding that "However, if the
European sovereign debt problems were to become bigger, we need to
keep in mind that that could bring about considerable downside
risks."
Failing to gain investors confidence "means that skepticism over the
sustainability of their debt in the market hasn't been cleared
away," Shinohara said, adding that "It's important that
countries reduce their budget deficit, but they also need to tackle
structural issues including boosting growth and lowering
unemployment."
The Euro rose slightly after the news to trade at 1.3376, compared
with the opening levels 1.3360, where it managed to set the highest
levels at 1.3457 and the lowest at 1.3320. The pound continued to
narrow trade, reaching 1.5842, from the opening levels of 1.5834.
Source: Fxstreet.com
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