Inflation in the Eurozone may decrease faster than expected.

The Euro has started to strengthen once again, buoyed by statements from ECB officials and decreasing inflation rates. There have been suggestions that inflation might decrease faster than anticipated. Christine Lagarde, the President of the ECB, confirmed last week the intent to maintain this interest rate for a longer duration. This economic forecast for the autumn season could significantly improve and bolster investor confidence.

The GDP in the Eurozone contracted by 0.1% in the third quarter, marking the first contraction since 2020. This was due to Germany's economy shrinking by -0.1%, Italy remaining at 0%, France experiencing marginal growth of 0.1%, and Spain growing by 0.3% on a yearly basis. Additionally, the ECB forecasts a mere 0.7% growth for the Eurozone in 2023, attributed to repeated interest rate hikes and rising commodity prices, resulting in reduced domestic demand.

Retail sales decreased by 0.3% in September, indicating reduced consumer demand due to persistent high inflation rates and increased borrowing costs over recent years. Non-food sales dropped by 1.9%, while oil sales decreased by 0.9%. Germany experienced its fourth consecutive month of declining retail trade, down by 0.8%.

The Eurozone inflation rate decreased to 2.9% year-on-year in October but remains higher than the European Central Bank's 2% target. This decrease affected both food and beverage prices, dropping from 8.8% to 7.5%. The service sector inflation rate remained relatively stable at 4.6%. Consumer expectations for inflation over the next 12 months saw a minor increase.

According to Bloomberg's survey, the Eurozone's inflation rate might fall below the 2% target by early 2024, a faster decline than anticipated by the ECB. This raises the possibility of an interest rate cut in June 2023.

The unemployment rate increased to 6.5% from 6.4% the previous month, with an additional 69,000 individuals unemployed, totaling 11.017 million people. Germany recorded its lowest unemployment rate at 3%, while Spain registered the highest at 12%. Companies continue to downsize due to increased costs.

Techical analysis data (5H)

Resistance: 0.9298, 0.9366, 0.9400

Support: 0.9196, 0.9162, 0.9094

Source: Investing.com