Euro steady as German CPI rises to 2.2%

The euro has lost ground on Thursday. In the North American session, EUR/USD is down 0.11%, trading at 1.0554 at the time of writing. US financial markets are closed for the Thanksgiving holiday and there are no US events on Thursday or Friday.

Annual inflation increased to 2.2%, up from 2% in October and just shy of the market estimate of 2.3%. This was the highest level in four months. Services inflation, which has been persistently high, was unchanged at 4%, double the European Central Bank’s target of 2%. Monthly, inflation declined by 0.2% m/m in November, down from a 0.4% gain but in line with expectations. Core inflation, which excludes food and energy prices, climbed to 3%, up from 2.9% in October and a six-month high.

The eurozone releases the November inflation report on Friday, with the markets expecting annual inflation to move higher, similar to what we saw in Germany today. The market estimate stands at 2.3% y/y, compared to 2% in October. Monthly, inflation is expected to tick lower to 0.2%, down from 0.3% in October.

The ECB is widely expected to lower rates at the Dec. 12 meeting and that won’t change even if eurozone inflation accelerated in October. Governing Council member Francois Villeroy de Galhau said on Thursday that the ECB had “significant room” to lower rates and suggested that an accommodative monetary policy could boost growth. Villeroy was optimistic about inflation, saying that the ECB could achieve its 2% target in early 2025.

• EUR/USD is testing support at 1.0545. Below, there is support at 1.0498
• There is resistance at 1.0612 and 1.0657