-Rabobank strategists
Over the last several weeks analysts were hoping April's inflation will pick up and Draghi will postpone the decision to launch the U.S.-style quantitative easing programme. Earlier this week, German inflation rate fell short of analysts' forecasts, hence, the overall CPI measure had a potential to disappoint as well. Nevertheless, despite weaker reading the most traded currency pair soared above the 1.38-mark, erasing the 20-pip loss that was registered immediately after the release of the data.
According to a report from the Eurostat, the cost of living in the 18-nation bloc advanced 0.7% in April from the same month a year earlier, following the final, record-low 0.5% figure registered in March. Markets, however, were betting on a 0.8% gain. The core measure, which strips out alcohol, tobacco, food and energy prices, posted a more solid gain of 1.0% compared with a 0.7% rise in March. The latest figures, however, do not decrease the pressure on Mario Draghi and the central bank, as the Eurozone is facing a risk of Japan-style deflation period. Price growth remains significantly below the ECB's target level of just under 2%. This performance has led increasing calls for the central bank to boost the economy. The ECB's officials have repeatedly stressed that the risks of deflation are muted, analysts however, believe that inflation is unlikely to pick up significantly any time soon.
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