While economists' forecasts were bested, Germany's inflation report clearly didn't surprise market participants. According to the the Federal Statistics Office's preliminary reading, consumer prices rose 0.6 percent through the month of July - matching the most aggressive increase in prices since December of 2006. However, far more interesting to rate watchers was the steady pace of the annualized figure. Through the year, price growth held steay at 3.3 percent to match the fastest pace of inflation in 12 years. The annualized EU-Harmonised figure held similarly passed the month unchanged at the fastest clip since Euro Zone records began with a 3.4 percent gait. Looking into the details of the report, it isn't surprising to inflation the headline figure was being driven primarily by energy prices. When fuel and heating oil components were excluded from the gauge, core inflation was rising at a far more tolerable 2.2 percent. This is an interesting point to note when considering the future price gauges which will take into account the sharp pull back in crude prices recently (and the refined fuel prices that will likely follow this move). Elsewhere, Europeans proclivity to travel with a strong currency encouraged domestic holiday packages to jumped 14 percent. In contrast, food prices rose a more moderate 0.3 percent - a small figure, but consistent in its impact on German's purchasing power and their demand for higher wages. - John Kicklighter, Currency Analyst for DailyFX.com
