EUR/USD: Spectacular decline in inflation in the Euro Zone, the single currency is declining

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It’s THE day of the week dedicated to inflation publications, publications naturally monitored like milk on fire by the community of currency traders. Before the publication at 2:30 p.m. of PCE (personal consumption index) prices, currency traders have just become aware of the first estimates of consumer prices for the month of November in the Euro Zone. And surprise, the dynamic of slowing inflation is even greater than expected.

Excluding food, energy, alcohol and tobacco (elements considered volatile), prices increased at an annualized rate of 3.6% in November, compared to a target of 3.9% and a month of October of 4.2%! A very significant slowdown which should bring a little flexibility in the monetary policy of the ECB, whose President, Christine Lagarde, will speak this afternoon, at the opening of a forum on banking supervision, in Frankfurt.

If this decline favors the main equity markets in Europe this morning (France, Germany, Italy), the Euro/Dollar currency pair, although a barometer of risk appetite, stands out by contracting towards $1.09, due to the new questions raised by these statistics on the timetable for a downward shift in rates. In fact, the “remuneration potential”, relative to the Dollar, is reduced.

All products combined, inflation is reduced to 2.4% according to this first estimate from EuroStat. The next publication covering all the data for the month of November 2023 is scheduled for December 19, 2023. At the same time, the pan-European statistical office published a stabilization of the unemployment rate at 6.5% of the active population in the Euro Zone .

Across the Atlantic, see you at 2:30 p.m. for the PCE. As a reminder, the Governor of the American Federal Reserve (Fed), Christopher Waller, expressed confidence on Tuesday in the current level of key rates, judging that they should allow the American economy to slow down sufficiently for inflation to return. towards 2%.

Remember that the Fed will hold its last monetary policy meeting of the year on December 12 and 13 and that its president, Jerome Powell, will speak on Friday.

At midday on the foreign exchange market, the Euro was trading against $1.0920 approximately.

KEY GRAPHIC ELEMENTS

After a bullish runaway characterized by the candle in marubozu school on November 14, followed by a very short consolidation and an early bullish extension, a technical adjustment is underway, an adjustment catalyzed by the statistical publication of the morning.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as Euro Dollar (EURUSD) prices are positioned between support at 1.0693 USD and resistance at 1.1012 USD.

DAILY DATA CHART