Standard Chartered predicts that euro-area core inflation for November will be 2.5% year-on-year, matching the consensus estimate. The prediction is based on surprises in Spain’s core inflation and how they affect the larger euro-area trend. A stronger Euro and data from Spain may ease inflation concerns linked to producer price indices (PPIs) in different countries.

November Core Inflation Forecast

The model indicates that the euro-area core inflation for November will be in line with the consensus estimate, according to data available until December 2. Key influences include the appreciation of the Euro, energy developments, and the behavior of PPIs. Spain’s core inflation met expectations and minimally impacted this forecast. In October, the model failed to predict the consensus correctly, forecasting a 2.3% year-on-year core inflation instead of the actual reading. The market’s expectations for European Central Bank rate cuts have reduced. A final cut is now projected for the second quarter of 2026. Concerns about a potential drop in demand for euro-area exports in 2026, boosted by a stronger Euro and Chinese imports, are taking center stage. Currently, there’s a low likelihood of a rate cut by Q2-2026, with only 8 basis points of cuts predicted. The November core inflation data for the Euro area is expected on December 2, with a consensus reading of 2.5%. This suggests that the risk of a significant market disruption is low, and traders could benefit from reduced volatility as the announcement date approaches. Recently, the Euro has risen to 1.12 against the US dollar, its highest since Q3 2024. This increase helps keep imported inflation at bay, countering some pressures seen in country-level data. For example, Germany’s producer prices rose by 0.3% last month. This balance supports the expectation of an accurate inflation figure.

Potential Undershooting Risks in 2026

It’s important to note that the model’s prediction was off regarding the October 2025 data, missing the inflation surprise of 2.4% versus the 2.3% consensus. Therefore, while low volatility is expected, it’s wise to hedge against unexpected outcomes. The market could be surprised again. Looking ahead, recent economic activity has been stronger than anticipated, with the flash composite PMI for November at 51.2, exceeding the 50.5 forecast. Nonetheless, we still believe the European Central Bank will make a final rate cut in Q2-2026. The market seems to underestimate this possibility, factoring in only about 8 basis points in cuts. This situation presents an opportunity for traders as the risk of inflation falling short of its target in 2026 increases. Weak demand for euro-area exports is a significant concern, especially with the recent US ISM Manufacturing index dropping to 48.9, signaling a contraction. Given the strong Euro, the ECB may need to act, making derivative positions that predict lower rates in mid-2026 appealing. Create your live VT Markets account and start trading now.

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