Core CPI unexpectedly dropped to an annual pace of 1.2% in July, significantly lower than 1.7% that was expected, and lower than last month’s 1.6%. This shows that the “secondary effects” of rising commodity prices is diminishing, as the economic slowdown is felt across the continent. Trichet’s stubborn rate hikes have taken their toll. Is he ready to change course? Headline consumer price index came out at 2.5%, exactly as reported in the initial read. The initial read was also lower than expected. The drop in Core CPI shows that the threats of inflation reaching wages is much lower. Weak inflation joins the latest disappointing GDP figures from both Germany and France. Germany’s economy hardly grew in Q2 – only 0.1%. France saw 0% growth. The growth for the whole euro-zone was 0.2%. For a change, the largest countries are weighing on growth instead of pushing it forward. In the last meeting, Trichet kept a strong tone against inflation, saying that the central bank will “monitor very closely”. This suggests that a rate hike is possible within two month. The next meeting of the ECB will be held at the beginning of September. The chances of hearing “strong vigilance” from him is very low. There’s a much higher chance of hearing a preparation for a rate cut. While the ECB raised the rates twice in the past months, its other policies recently went in the other direction: the ECB is buying lots of Spanish and Italian bonds in order to stop contagion. In the first week of this action, the ECB spent 22 billion euros and managed to sterilize it – draining money from the markets. If these moves strengthen, it may not be able to sterilize it, and will find itself printing euros. In any case, the gap between the policy of buying bonds – measures of easing, and standing firm on the rates which is measures of tightening, is likely to be closed towards the easing side. EUR/USD is still strong after these news, but is clearly capped by resistance at 1.4450. For more on the pair, see the euro dollar forecast. Yohay Elam Yohay Elam Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts. Yohay's Google Profile View All Post By Yohay Elam Opinions share Read Next Eurozone engine stalls FxPro - Forex Broker 11 years Core CPI unexpectedly dropped to an annual pace of 1.2% in July, significantly lower than 1.7% that was expected, and lower than last month's 1.6%. This shows that the "secondary effects" of rising commodity prices is diminishing, as the economic slowdown is felt across the continent. Trichet's stubborn rate hikes have taken their toll. Is he ready to change course? Headline consumer price index came out at 2.5%, exactly as reported in the initial read. The initial read was also lower than expected. The drop in Core CPI shows that the threats of inflation reaching wages is much lower. Weak… Top Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk.4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk.5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.