A sharp increase in import prices in Germany, combined with aggressive talk by European Central Bank officials, suggests that interest rates are more apt to rise rather than to fall in the Euro zone in the coming months.
The June data of German import prices was up 1.5% from the previous month, and almost 9% from a year ago. Analysts had been expecting a more moderate gain of about 1%. Analysts suggest that as long as these numbers continue to come out higher than the target range, there is little chance that the European Central Bank will adopt a more “dovish” position, although the threat remains of an economic slowdown in the Euro zone.
At 07:15 GMT, the Euro traded briefly at $1.5730, up from $1.5690 earlier in the day. Meanwhile, the U.S. Dollar has been coming under pressure from the Yen, briefly touching a low of 106.60 Yen, compared to 107.00 Yen earlier in the day.
The U.S. Dollar remains weak following the release of Thursday’s poor housing data, which indicated that the health of the U.S. financial sector is still in doubt. A report on U.S. consumer confidence is expected to be released shortly, and it is anticipated that July’s figures will be revised down from 56.6 to 56.4.