By Samir Al Khoury
CPI fell year-on-year in November in the Eurozone, registering 2.4%, which is lower than both expectations (2.7%) and the previous reading (2.9%). The core CPI, excluding food and energy, also declined on an annual basis, recording 3.6%, below expectations (3.9%) and the prior reading (4.2%).
The manufacturing and services purchasing managers’ indices in the “Old Continent” remain in the contraction category, posting 44.2 points and 48.2 points, respectively. These figures indicate the sustained weakness of European economies, with Germany, the largest economy in Europe, still grappling with a noticeable economic slowdown.
Isabel Schnabel, a member of the Executive Board of the European Central Bank, stated yesterday that inflation is experiencing a significant slowdown, eliminating the possibility of the bank resorting to an additional increase in interest rates.
Regarding European interest rate expectations for next year, markets are currently pricing in approximately a 90% probability that the European Central Bank will commence reducing interest rates in the first quarter of 2024. This pricing anticipates five cuts of 25 basis points and an 80% probability of a sixth cut, with the total reductions amounting to 150 basis points.
Technically, the outlook for the euro currency appears less promising. After reaching 1.1017 against the dollar on November 29 of this year, its highest level since August 10, 2023, the euro declined to 1.0775 today, reflecting a decrease of approximately 2.2%.
Furthermore, the EUR/USD pair broke the 200-day moving average at 1.0821, and the DEATH CROSS persists between the 50-day moving average at 1.0696 and the 200-day moving average, indicating negative momentum for the euro against the dollar.
However, if the pivot point of the EUR/USD at 1.0807 is breached today, it is likely to target support levels at 1.0766, 1.0736, and 1.0695. If it surpasses the pivot point, it may target resistance levels at 1.0837, 1.0878, and 1.0908.
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Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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