Euro area core inflation accelerates above expectation in April

Euro area core inflation accelerated temporarily in April, coming above market expectations. On a year-on-year basis, core inflation accelerated to 1.2 percent from prior month’s 0.8 percent. Consensus expectations were a rise to 1 percent. The acceleration was driven by the late timing of Easter in 2019 compared to 2018. The most seasonal constituents of core inflation, such as package holidays, picked up considerably in days before and around Easter, noted Nordea Bank in a research report.

There does not seem to be any change to the underlying trend in core inflation. Services price inflation accelerated temporarily, especially driven by the German subcomponent, which in turn was driven by the highly volatile package holiday prices. The risks to the downside persist upholding the pressure on the ECB to give further easing once inflation eases back to behind staff projections in May and going forward.

The headline inflation accelerated to 1.7 percent, as compared with 1.6 percent, driven by a rise in energy price inflation to 5.4 percent which was driven by increased oil prices and a strong dollar.

“Markets currently anticipate a reverse contribution from energy prices throughout the second half of 2019, which will naturally be a drag to headline inflation”, added Nordea Bank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -79.7935 while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 87.9554 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex