The annual Harmonized Index of Consumer Prices (HICP) for the euro area showed a rise of 2.2%, slightly above the previously expected increase of 2.1%. However, for the month, there was a decline of 0.3% in the headline HICP.
When it comes to the core HICP, which excludes fluctuating categories like food, energy, and tobacco, it grew by 2.4%. This was a bit slower than the anticipated 2.5%, and month-on-month, the core HICP also saw a drop of 0.5%.
Market Reaction
The initial response to the preliminary HICP data for November was negative for the EUR/USD pair, leading major currency pairs to trade steadily around 1.1600.
The table below summarizes the Euro’s performance against several major currencies today, with the euro showing strength particularly against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.11% | 0.34% | 0.06% | -0.07% | 0.20% | -0.04% | |
| EUR | -0.03% | 0.09% | 0.33% | 0.03% | -0.11% | 0.17% | -0.07% | |
| GBP | -0.11% | -0.09% | 0.23% | -0.06% | -0.21% | 0.09% | -0.16% | |
| JPY | -0.34% | -0.33% | -0.23% | -0.29% | -0.42% | -0.16% | -0.39% | |
| CAD | -0.06% | -0.03% | 0.06% | 0.29% | -0.13% | 0.14% | -0.10% | |
| AUD | 0.07% | 0.11% | 0.21% | 0.42% | 0.13% | 0.28% | 0.03% | |
| NZD | -0.20% | -0.17% | -0.09% | 0.16% | -0.14% | -0.28% | -0.24% | |
| CHF | 0.04% | 0.07% | 0.16% | 0.39% | 0.10% | -0.03% | 0.24% |
This data was published as part of an overview of the Eurozone flash HICP data for November.
Overview of Upcoming HICP Release
Eurostat is set to publish the preliminary HICP data for November this Tuesday at 10 p.m. (GMT). The report is anticipated to indicate that the headline HICP experienced a 2.1% year-over-year increase, while the core index is expected to rise slightly to 2.5% from 2.4% in October. On a monthly basis, inflation in October was recorded at 0.2% for the overall euro area.
Potential Impact on EUR/USD
The inflation figures recently released show no immediate inflation threat in the eurozone’s larger economies—namely France, Spain, and Italy. However, Germany’s unexpectedly high inflation figures have caused the European Central Bank (ECB) to maintain its policy stance. If stronger inflation data comes out, it could lead to an increase in the euro’s value, which might benefit the EUR/USD pair, extending a recent upward trend.
On the flip side, any weakness may not have a significant immediate effect due to the prevailing bearish sentiment toward the US dollar (USD), likely providing a supportive backdrop for the EUR/USD pair. The differences in policy expectations between the ECB and the Federal Reserve hint that upward price movements may be the more likely outcome.
Technical Analysis
The 100-day simple moving average (SMA) has flattened out, indicating a deceleration in the broader trend. Prices remain beneath this average, suggesting a slightly defensive bias for the short term. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator sits above the signal line while its histogram is rising, pointing towards improving momentum. The relative strength index (RSI) hovers around 55, showing a fairly neutral to positive trend. The current resistance point at 1.1644 needs to be surpassed for the upward momentum to strengthen.
Should the prices fall beneath the 100-day SMA, sellers will likely gain an upper hand, causing any rebounds to stall against resistance. However, if there’s a decisive close above this SMA, it could unlock further profits and shift the trend more positively. The MACD’s encouraging tone aligns with increasing buying interest, and the RSI suggests there is room for growth if prices can return to their average levels.
