Published on 04.01.2023 15:24

The Euro has jumped above the 1.06 mark against the US dollar, reversing yesterday’s heavy selloff which occurred after a reduction in inflation figures raised speculation that rising prices in Europe’s largest economy may be finally coming under control.

The headline CPI inflation reading for Germany fell for the third consecutive month. After plunging to 8.6 percent, the lowest since August, Analysts had been predicting a figure of 9.1 percent which was down from 10 percent.

The dwindling inflation figures may be attributed to the German government’s initiative to lower energy bills which has drastically impacted the consumer price inflation. A one-off payment for households and small businesses came in December, which offset the surge in energy prices due to the Ukraine conflict.

The European Central Bank (ECB) might now be in a position to start slowing the rate of interest rate hikes. A sign of cooling in the Euro area’s largest economy could also signal a slowdown in inflation across the bloc.

S&P Global Composite PMI figures for December which hit the market earlier today at 49.3 against analysts’ expectations for a figure of 48.8 gave a boost to the European currency and now market participants will await ISM Manufacturing PMI from the US later in the American session which are expected to hit the market at 48.5 against expectations for a figure of 49.

A weaker figure from the US may also lead to speculation that the US Federal reserve may also put the brakes on their interest rate hiking cycle sooner than expected which may lend some further support to the Euro as the trading day comes to an end.


FAQ