Inflation Back into Positive Figures for the Euro Area

Euro area inflation has crept away from negative figures for the first time since January this year, as in June inflation was 0.1%, up from minus 0.1% that was recorded in May.

The whole of the European Union (EU) also fared better, with prices stable last month, compared to the minus 0.1% figure in May matching the euro area, the latest data is down from the corresponding month a year ago, as inflation in the euro area was 0.2%, and 0.1% for the EU.

The biggest influences on the hike in inflation came from  restaurants and cafes by 0.11%, rents and tobacco by 0.06%, while fuels for transport at minus 0.41%, heating oil minus 0.16%, and gas minus 0.13 %, had the biggest downward impacts.

In June, negative annual rates were observed in thirteen member states, with the lowest annual rates in Cyprus at minus 2%, Bulgaria minus 1.9% and Croatia  minus 1.2%, the highest annual rates were recorded in Belgium by 1.8%, Sweden 1.2%, and Malta 1%, in comparison with May 2016, annual inflation fell in two member states, remained stable in eight, and rose in 17.

The European Central Bank will find the results encouraging in their ongoing quest to boost inflation, while still below their target of 2%, they will be hoping that the inflationary measures they have introduced, including a minus 0.4% bank deposit rate, and an expansion of the quantitative easing programme of 80 billion euros per month, are working.

Euro Area International Trade in Goods Surplus at 24.6 billion

The euro area achieved a trade in goods excess of 24.6 billion euros for May, according to Eurostat, as exports to the rest of the world totalled 167.4 billion euros, an increase of 2% from the corresponding month last year.

While imports from the rest of the world stood at 142.8 billion euros, a fall of 2% compared with the May tally from last year of  146 billion euros.

In January to May this year, the euro area exports of goods to the rest of the world was 826.6 billion euros, which was borderline stable compared with January to May in  2015, whereas imports suffered a fall of 3% down to 721.3 billion compared with January to May 2015, as a result the euro area recorded a surplus of 105.3 billion, compared with 85.9 billion in January through to May 2015.

Pound Continues Rise Post Rate Hold

 The pound has strengthened further against the US dollar, after yesterday’s surprise decision by the Bank of England to hold interest rates at 0.5%, as they were expected to be reduced by 25 basis points.

So far today GMT the GBP/USD rate peaked at just over $1.345, having jumped up to $1.34 yesterday, once the central bank’s verdict was announced, against the euro the pound has also gained ground, rising to 1.21 euros.

New Prime Minister Theresa May has  finalised her government team, with former leadership challenger Michael Gove omitted altogether, euro sceptics Phllip Hammond and Boris Johnson were made Chancellor and Foreign Secretary respectively.

FC Exchange said that the next problem facing the Bank of England will be how it goes about dealing with a potential slowdown in the economy post ‘Brexit‘, and also preventing a significant increase in inflation through a weakening pound.

They believe Bank of England Governor Mark Carney will await more data and forecasts, before a long term plan is ironed out.