EUROZONE INFLATION AS EXPECTED WAITING FOR ECB JANUARY MEETING

We had already anticipated that main market mover of the past week would have been Eurozone inflation.

Market expectations were confirmed and European prices in December increased on a monthly basis by 0,4%.

On an annual basis, however, inflation increased by + 1,4%, confirming both market expectations and the result of the previous analysis.

The index of the main consumer prices rose 0,5% on a monthly basis and 0,9% on an annual basis, compared to the previous -0,1% and +0,9% respectively. Also in this case market expectations were right.

When the inflation data were released, the euro dollar exchange rate slightly widened the pre-existing downward and went from $1,2249 to $1,2242.

Another important data from last week was China’s GDP, whose publication surprised market’s expectations.

On an annual basis, the Chinese economy grew by 6,8% while on a quarterly basis, China’s gross domestic product increased by 1,6%, confirming expectations of + 1,6%, but not the previous data of + 1,7%.

Surprisingly, Chinese industrial production also rose 6,2% against 6,0% of analysts expectations and 6,1% of the previous data.

In the next week, the attention of the market will be attracted completely by the ECB’s January 25 meeting, the first of 2018. Analysts do not expect particular surprises from Mario Draghi, but the goal in these cases is to grasp some new cue on the end of Quantitative Easing Program.

It seems that now the decisions on interest rates, once the cornerstone of this kind of meetings, have become a marginal decision. Perhaps, because no one expects a rise in European interest rates in the coming months.

As for the euro, however, this situation can only be a benefit but apparently analysts have in store different ideas for this currency.

They are increasingly convinced that Governing Council of the European Central Bank, next Thursday, will try to bring down the euro through its statements. The most recent words of several ECB members confirm the inconvenience of the increase of the euro as it obscures all the efforts that the central bank is doing to stimulate inflation towards the 2% target.

The widespread opinion is that euro could become so strong to become an obstacle to the return of inflation to normal levels by making imports cheaper. During this week, some members of the ECB Governing Council explained that listing of the euro must be monitored very carefully as a source of fear.

Among the most important events of next week there will also be a whole series of PMI indexes referring to the manufacturing, composite and services sectors. Eyes focused also on the confidence sentiment of the Eurozone.

Then, we can find also the US GDP with the relative price index, which will be very useful pending the next FOMC meeting scheduled for the end of the month.

On the economic calendar, also appears the appointment of the World Economic Forum in Davos, the great event focused on the topics of economy and development which will be attended by the most important world leaders.