LIVE MARKETS-Oil and the euro, swings and roundabouts for the ECB

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OIL AND THE EURO, SWINGS AND ROUNDABOUTS FOR THE ECB

As the saying goes, the money you lose on the swings you make on the roundabouts, and Nomura point out this applies to this week's market moves and their impact on European inflation.

(They don't make the amusement park analogy, that's us, but as you'll see, it feels fair.)

Andrzej Szczepaniak, senior European economist at the Japanese bank, points out in a note that the ECB estimates a 10% appreciation in the euro EUR=EBS lowers headline inflation by around 0.4 percentage points, by making imports cheaper.

Meanwhile, the central bank also estimates that a 10% appreciation in oil prices LCOc1 increases headline inflation by around 0.4pp.

We've not got moves of that size on either yet, but, Szczepaniak says, oil is about 3% above the ECB's assumption in December, and euro/dollar is also 3% up from those forecasts.

As a result, when it comes to inflation at least, by and large the two offset each other.

There's a bit of angst in the market this week about whether a stronger euro would make the ECB cut rates more, but that seems less likely if the two keep moving in tandem.

(Alun John)

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