Breaking: Eurozone Preliminary Inflation jumps to 5.8% YoY in February, a big beat

The annualized Eurozone Harmonised Index of Consumer Prices (HICP) jumps by 5.8% in February, coming in much higher than the previous reading of 5.1%, the latest data published by Eurostat showed on Wednesday. The consensus forecast was for a hotter reading of 5.4%.

The core figures arrived at 2.7% YoY in February when compared to 2.5% expectations and 2.3% booked in January.

The Euro area figures come a day after Germany’s annual inflation for February rose above expectations of 5.4%, arriving at 5.5% following a 5.1% increase reported in January.

Soaring inflation in the Euro area has intensified a policy dilemma for the European Central Bank (ECB), which must convey a sense of calm amid war-related market turmoil but also respond to mounting price pressures, per Reuters.

The bloc’s HICP figures hold significance, as it helps investor assess the chances that the European Central Bank (ECB) might signal a faster than the expected path for policy tightening. 

Key details (via Eurostat)

“A 32% jump in energy costs drove inflation last month but unprocessed food prices were also up sharply, rising 6.1% and making inflation especially painful for lower-income families.”

“Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in February (31.7%, compared with 28.8% in January), followed by food, alcohol & tobacco (4.1%, compared with 3.5% in January), non-energy industrial goods (3.0%, compared with 2.1% in January) and services (2.5%, compared with 2.3% in January).”

EUR/USD reaction

EUR/USD is off the new 2022 low of 1.1059 but remains heavy near 1.1080, as the time of writing. The spot is losing 0.44% on the day, as the safe-haven US dollar holds firmer amid escalating Russia-Ukraine conflict.