EURUSD: Insufficient inflation in Germany returns pressure on the euro

The euro continued to decline against the dollar after an unsuccessful growth attempt in the first half of the day amid good data on bank lending to eurozone companies, which increased. However, closer to the beginning of the North American session, the demand for the dollar returned again after a disappointing report on inflation in Germany, whose growth continued to slow down.

According to the European Central Bank, lending to non-financial companies in February of this year grew immediately by 3.7% on an annualized basis. In January, the same indicator showed an increase of only 3.4%. Let me remind you that the eurozone economy is dependent on the availability of financing, and changes in this indicator can significantly affect the forecasts of economists regarding GDP growth rates.

As for household lending, it also increased. As indicated in the report, lending in this sector in February of the current year grew by 3.3% on an annualized basis, after rising by 3.2% in January. The M3 monetary aggregate rose 4.3% in February after rising 3.8% in January. Economists had expected the indicator to grow by 3.9%.

Weak data on the sentiment index in the eurozone economy has disappointed investors, once again signaling an impending recession, which the European Central Bank has so far denied in every way.

According to the report of the European Commission, the sentiment index in the eurozone economy in March 2019 was 105.5 points against 106.2 points in February. Economists had expected the index to be 105.9 points in March.

The main pressure on the euro was formed after the release of the report, indicating that inflation in the flagship economy of the eurozone slowed down in March.

According to the German Federal Bureau of statistics, Germany's harmonized consumer price index (HCPI) in March of this year grew by only 1.5% compared to the same period of the previous year after rising by 1.7% in February, which fully coincided with the forecast of economists. Although the data are preliminary, a slower rise in food prices could have a significant impact on the final calculation.


In March, compared to February of the same year, the preliminary CPI rose only by 0.4%, while it was expected to grow by 0.6%.

The main support is provided by energy prices, which in Germany rose by 4.5% in March, while the rise in food prices slowed to 0.7% from 1.4% in February.

As for the technical picture of the EURUSD pair, the further downward trend will slow down in the area of new lows, which are now visible in the 1.1200 and 1.1170 areas. However, the main goal of sellers of risky assets will be the 1.1150 support test. Under the scenario of the upward correction of the euro, sellers will not take long to wait in the area of major resistance 1.1270 and 1.1295.

The material has been provided by InstaForex Company -