Euro area headline inflation to average 1.7 pct in 2018, likely to begin moderating from January 2019

Euro area headline HICP inflation is expected to average 1.7 percent this year, stated Barclays in a research report. For next year, inflation is expected to average 1.5 percent. Core inflation is likely to come in at 1.1 percent and 1.2 percent in 2018 and 2019, respectively.

The headline inflation is likely to hover around the ECB target of 2 percent until the end of this year, slightly longer than anticipated earlier, owing to stronger oil price assumptions. Headline inflation is expected to start moderating from January 2019 and ease towards the levels of core inflation by the end of next year. Underlying inflation is likely to see only modest acceleration, noted Barclays.

Core goods and services prices are not expected to see non-linear acceleration. Meanwhile, the support from core goods PPI is likely to be softened by currency pressures. On the non-tradable side, services prices are expected to keep rebounding, underpinned by rising wages in the business services sector.

“However, we expect the labour cost recovery and pass-through to consumer prices will continue to unfold slowly”, added Barclays.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was highly bearish at 115.726, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 51.6432. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex