Inflation in the Eurozone has decreased more than expected.

The euro has been consistently strengthening since the beginning of last month, benefiting from the weakness of the dollar. Moreover, the Personal Consumption Expenditures (PCE) price index is showing signs of another decline. This supports the possibility that the Fed might begin reducing interest rates next year, with the initial rate cut likely to occur in March. Simultaneously, investors anticipate that the ECB will also start lowering interest rates next year, aligning with the Federal Reserve's rate reductions.

Consumer confidence in the Eurozone increased by 1.8 points from the previous month, reaching -15.1 in December 2023, marking the highest in 5 months and surpassing the market's initial estimate of -16.4. Consumers are optimistic that interest rates in the Eurozone will soon start decreasing due to the slower inflation rate. Consumer confidence across the European Union increased by 1.5 points to -16.

The inflation rate in the Eurozone dropped by 2.4% year-on-year in November, marking the most substantial decline since 2021. This was mainly due to the significant decrease in energy prices, which fell by 11.5%. Meanwhile, the core inflation rate, excluding energy and food prices, decreased by 3.6%.

ECB President Lagarde mentioned that inflation in December showed signs of an increase due to the significant impact of increased energy input costs. It's also predicted that inflation rates will decrease slower than anticipated due to the upward adjustment in prices of goods and services from past monetary policies.

The ECB maintained its interest rate at 4.5% during the latest meeting, prioritizing the control of inflation as interest rates for deposits remained at a historic high of 4%. The ECB predicts average inflation rates to be at 2.7% in 2024, 2.1% in 2025, and 1.9% in 2026.

Wage growth in the Eurozone increased by 5.3% year-on-year in the third quarter, indicating significant inflationary pressure in sectors like manufacturing, public utilities, and construction, all showing growth of over 5%.

The Eurozone trade surplus widened to 11.1 billion euros in October, with imports continuously decreasing by 16.3% to 235.8 billion euros. Even though there was a substantial reduction in imports, oil imports still remain a significant part of the Eurozone's imports. Meanwhile, exports slightly declined by 2.4% to 246.9 billion euros, with machinery and transport being the leading export sectors.

Techical analysis data (5H)

Resistance: 0.9051, 0.9068, 0.9076

Support: 0.9025, 0.9016, 0.8999

Source: Investing.com