- EUR/USD hovers above 1.0900 on softer Eurozone inflation data
- Eurozone HICP eases to 2.4% YoY in November from 2.9% prior, slowest annual pace since July 2021
- Fed expected to hold rates, possibly cut from mid-2024; markets await ECB President Lagarde’s speech, US ISM Manufacturing PMI
The EUR/USD pair was seen hovering around the 1.0900 psychological level, having retraced from the multi-month high of 1.1017 early on Friday. Concerns over falling inflation and a sluggish Eurozone economy are fuelling expectations of potential interest rate cuts. Meanwhile, the weakened US Dollar (USD) may limit the downside of the pair, which was last seen trading around 1.0902, up 0.16% on the day.
Data from Eurostat released on Thursday revealed that inflation in the Eurozone, as measured by the Harmonized Index of Consumer Prices (HICP), eased to 2.4% YoY in November from 2.9% in the prior reading, marking the slowest annual pace since July 2021. On a monthly basis, the inflation figure declined 0.5% compared to a 0.1% increase previously. The slowing in HICP was mainly driven by declining energy prices and lower growth in food and service prices.
The Eurozone inflation report has prompted speculation among investors that the European Central Bank may initiate its deposit rate cut as soon as next April. ECB President Christine Lagarde cautioned this week that it was premature to start declaring victory as wage pressures remain robust.
Across the pond, markets are anticipating the likelihood that the Federal Reserve (Fed) will not raise rates at any of its upcoming meetings and may begin cutting rates from mid-2024. This, in turn, is weighing on the US Dollar (USD) and acting as a tailwind for the EUR/USD pair.
On the data front, the US Core Personal Consumption Expenditures Price Index (core PCE) increased 0.2% MoM and 3.5% YoY in October, in line with expectations. Initial weekly Jobless Claims rose to 218K from the previous week’s 211K, below the estimated 220K. Continuing Claims climbed to 1.93 million, the highest level since November 27, 2021.
Market participants will keep an eye on ECB President Lagarde’s speech on Friday for fresh impetus. Meanwhile, in the American session, the US ISM Manufacturing PMI for November will be released and Fed Chair Jerome Powell is slated to speak.
Information on these pages includes forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way be construed as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from errors, errors, or material misstatements. It also does not guarantee that this information is of a timely nature.
