German CPI Falls Below Expectations, Euro Steady

The euro has started the trading week quietly. In the North American session, EUR/USD is trading at 1.0807, down 0.13%.

German CPI dips to 2.3%

The EU-harmonised CPI in Germany for March was lower than expected, with a gain of 2.3%. This was much lower than the February rate of 2.6% and below the market estimate of 2.4%. Significantly, this was the lowest level in six months, driven by lower oil prices and the weak German economy. German core CPI eased to 2.5%, the lowest rate since June 2021;

Monthly, CPI eased to 0.4% from 0.5% and was also lower than the market estimate of 0.5%. Services inflation, which has long been perisitent and a headache for the European Central Bank, declined to 3.4% from 3.8% in February.

The drop in German inflation supports the case for ECB policymakers to continue lowering interest rates. The central bank lowered rates by a quarter-point to 2.5% in March and meets next on April 17. The eurozone will release the initial inflation release for March on Tuesday, with headline CPI expected to ease to 2.2% (2.3% in February) and the core rate to 2.5% (2.6% in February).

US and global financial markets are seeing a wave of selling, which began Friday. There is a great deal of uncertainty as to what US President Trump will do later in the week. Trump has said he will introduce reciprocal tariffs on April 3 but it's unclear which countries will be affected and what tariff rate will be imposed.

The Nasdaq was down as much as 2.5% today as investors are jittery about the tariffs and how affected countries will respond. If the US round of tariffs are met with counter-tariffs against US exports, the specter of a global trade war will be one step closer.