low inflation means strong dollar

hello,

My recommendation dated 27 January has proven to be perfect investment in generating good result.

recommendation short
recommendation short - develop my conclusions

Before we proceed to analyze the interest rate market, I will present data that have in recent days the biggest impact on the behavior of the EUR/USD.

Germany - inflation in some regions (for January):

Brandenburg -0.4 m/m, 1.5% y/y; 

Hesse -0.5 m/m, 1.2% y/y; 

Bavaria -0.7% m/m, 1.1% y/y; 

North Rhine-Westphalia -0.6% m/m, 1.7% y/y.

Germany - CPI inflation (for January): 1.3% y/y, expected 1.5% y/y;

HICP inflation of 1.2%. Expected 1.3%; 

Readings m/m: 

CPI: -0.6% Expected -0.4%;

HICP: -0.7%. Expected -0.6%

HICP inflation in the euro area in January: 0.7% y/y 

The consensus: 0.9% y/y previously: 0.8% y/y 

Core inflation: 0.8% y/y, consensus: 0.8% y/y

The interest rate market reacts to all the curves. From short-term contracts after long-term contracts are expected to loosen the ECB due to weak inflation reading.

FRAs contracts 9×12 and 18×24 are at the lowest level since May 2013, and 3×6 tests the level of November last year.

Market expectations are therefore unambiguous, we all expect to start on a larger scale easing in the European Union. The use of additional tools with representatives of the ECB said many times. Among other things, today Mr. Coeure. So, we wait until February 6, when the conference will be held at the voice of Mario Draghi takes.

chart 1. FRAs contracts 2014-01-31 

chart 2. spread between 10Y Govt bond Ger & U.S. 2014-01-31

regards,

oscarjp

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