Euro-area CPI Estimate Actual 1.1%, Expected 1.4%, Previous 1.6%

Release Explanation: CPI measures the average price of a fixed market basket of goods and services purchased by consumers, and therefore give an overall read of Inflationary pressures. It is the most widely used Inflation indicator of Central Banks, Institutions, and Governments. It is used to calculate Cost of Living numbers for Government programs. Each regional Central Bank will have their own CPI Target rate, and each will differ in line with the way they individually want to control the aspects of their own economies

Trade Desk Thoughts: The strong declines seen lately in the commodity markets, especially in the crude oil's valuation, has caused the Euro-area CPI go under the 2% target rate faster than any one would have thought a few months back. The release for the month of January shows the CPI read standing at 1.1%, despite earlier this year the CPI hit a record rate of 4.0%. The outlook for inflation clearly lies to the downside now, but ECB officials have said they do not expect the inflation gauge to fall below the 0% benchmark, at least for a longer period

Forex Technical Reaction: The euro is trading just below TheLFB S1 (1.2850), after it fell 90 pips overnight. In the last three days, the euro plunged as the market was driven by risk aversion.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved.