Release Explanation: The CPI measures the average price of a fixed market basket of goods and services purchased by consumers, and therefore gives 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: Inflation rose in February to 1.2% from one-year earlier, in-line with the Flash CPI forecast. The strong declines in CPI sub-indexes helped the inflation gauge reach the 2% target much earlier than forecast. However, the core CPI rose more than expected, 1.7% vs 1.6%. In February the inflation gauge rose for the first time in the last six months.
The main components with the highest monthly rates were clothing (1.5%), recreation & culture (1.1%) and transport (0.6%), while the lowest were food (-0.1%), housing and communications (0.0% each). In particular, package holidays (+0.08 percentage points), fuels for transport (+0.07) and garments (+0.06) had the largest upward impacts, while cars (-0.04) had the biggest downward impact.
Forex Technical Reaction: The euro rose 50 pips following the news release. Since the new trading day started, the euro has gained 180 pips and broke above the 50-day simple moving average. However, the pair is now testing the 100-day simple moving average.