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Germany, the  locomotive of the euro-zone, is going backward in terms of inflation. PRices dropped 0.3% in September  according to the flash reading, worse than -0.1%. Year over year, the drop is from a positive +0.1% to -0.2%, also worse than expected.

Will the ECB act?

Or perhaps it could wait as the euro already reacted? Here we see it sliding:

EURUSD technical chart falling with inflation September 29 2015

It’s not only Germany: we also had a preliminary release from Spain, the euro-zone’s fourth largest economy and one of the countries that suffered most from deflation. Expectations stood on a drop of 0.6% y/y and the actual result was a y/y drop of 0.9%. It has already been worse, but this doesn’t bode well either.

Is it only oil which is  considered transitory? Or is it already  deeper and requires action from the ECB?

We will get a better picture tomorrow with the numbers for all the euro-zone which also include the core CPI.  Core prices are  expected to  rise by 0.9% y/y and the headline prices by 0.1%.

We cannot rule out falling prices  in the headline  number: outright deflation like in Germany. But what will happen with the core number? It carries a lot of weight now.

The euro already reacted negatively, but  for the bigger moves, we’ll have to hear from Draghi and his colleagues.

In his recent public appearance, he didn’t seem to be in a rush to act. This was echoed by a few of those sitting beside him in the Governing Council, most notably his Lithuanian one.

It will be interesting to see how they react after the numbers are release.