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Societe Generale economists highlight that Eurozone inflation has not yet reflected indirect impacts from the energy crisis in food or goods prices. Despite elevated energy costs, core inflation (excluding energy and food) remains subdued, suggesting limited second-round effects. The report notes that while energy prices have surged, pass-through to other sectors has been delayed due to factors like supply chain resilience and competitive pricing strategies.
This development is critical for forex markets as the Euro's performance against the US Dollar (EUR/USD) hinges on divergent inflation trajectories. If indirect effects materialize later, the European Central Bank (ECB) may face prolonged policy uncertainty, affecting EUR volatility. Traders should monitor upcoming Eurostat data on consumer price indices for signs of spillover.
For global markets, the delayed inflationary impact could delay ECB rate hikes, creating a policy divergence with the Federal Reserve. Investors should watch for shifts in ECB guidance during upcoming monetary policy meetings. The primary asset to track is EUR/USD, with potential ripple effects on commodities like Oil due to energy price correlations.
