THE TAKEAWAY: Euro-zone inflation estimated at 2%, meeting an ECB target -> Unemployment remains at 11.7% for the third month -> Euro trading stays just below a 14-month high

Euro-zone annual inflation met the ECB’s 2% target for the first time since 2010, as unemployment stalled for the third month at the highest level since the creation of the Euro-zone.

The consumer price index for January was estimated by Eurostat at 2% higher than January 2012, lower than expectations for inflation to remain at 2%. Meanwhile, the unemployment rate was reported at 11.7%, beating expectation for 11.9%, and remaining unchanged from November’s revised unemployment rate.

The annual rise in energy prices fell to 3.9% from 5.2% in December, while the rise in food prices remained at 3.2%. In the Euro-zone, 18.715 million people were unemployed in December, according to Eurostat. Austria saw the lowest unemployment rate in December at 4.3%, followed by 5.3% in Germany and Luxembourg. Greece saw the highest unemployment at 26.8% in October.

The ECB predicted that inflation would fall to its target 2% in 2013. Higher inflation discourages the ECB from cutting the interest rate in its next meeting. However, the ECB expects a recovery later in 2013 and therefore may not cut the interest rate even with the lower inflation.

The Euro did not significantly react to the unemployment rate or inflation, possibly because the opposing effects of each release may have canceled each other out and left the price as is. The Euro set a new 14-month high in today’s Forex trading following improved estimates of Euro-zone PMI’s. Resistance may now be provided by the next high around 1.3850, and support could be provided by a broken resistance around 1.3500.

EURUSD Daily: February 1, 2013

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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