The Eurozone’s Harmonized Index of Consumer Prices (HICP) rose by 2.1% annually in October, which is a slight decrease from September’s 2.2%. In contrast, core HICP, which excludes energy and food prices, increased by 2.4%, beating the expected 2.3%. Monthly, headline HICP rose by 0.2% and core HICP by 0.3%. As for the EUR/USD exchange rate, it was around 1.1575, recovering from a two-week low of 1.1550. The Euro had a mixed performance against other currencies but showed strength against the New Zealand Dollar.

Eurozone HICP Data

The preliminary HICP data for the Eurozone predicted a minor decrease, anticipating a rate of 2.1% year-over-year for October. The core inflation was expected to be 2.3%, down from 2.4%. The European Central Bank (ECB) has kept interest rates unchanged, which reflects its stable inflation outlook and ongoing economic growth. However, market factors, including potential ECB policy changes and mixed German Retail Sales data, could influence the EUR/USD exchange rate. Analysts are noting a moderation in inflation in the Eurozone. Inflation can affect currency values significantly. High inflation might lead to currency appreciation due to interest rate changes. Additionally, gold’s value can decline when inflation rates rise, driven by interest rate variations.

Eurozone October Inflation Numbers

October’s inflation numbers from the Eurozone present a mixed scenario that requires close monitoring. The overall inflation rate fell to 2.1%, but core inflation, which the ECB watches closely, unexpectedly increased to 2.4%. This indicates that while energy prices may be stable, other price pressures remain persistent. This situation poses challenges for the ECB, which plans to keep interest rates steady. Meanwhile, recent data from the United States shows core inflation stable at 3.4%, possibly forcing the Federal Reserve to maintain its strict policies for a longer period. This difference in central bank strategies is a key reason why the EUR/USD pair is struggling to stay above 1.1550. For derivative traders, this may indicate a bearish outlook for the Euro against the US dollar in the coming weeks. It might be wise to consider buying put options on the EUR/USD or taking short positions in Euro futures contracts. Technical analysis suggests a potential drop towards the 1.1400 level if the current support at 1.1542 is broken. Looking back, we saw a similar scenario in early 2024 when ongoing core inflation delays led to a strong dollar rally. Economic data supports this perspective, as Eurozone third-quarter GDP growth was confirmed at a sluggish 0.7% annually, much lower than the stronger growth in the US. This weak economic environment makes it tougher for the Euro to gain support. Despite concerns about inflation, gold might not be the reliable safe haven it once was, even with prices near $4,000 an ounce. The high opportunity cost of holding gold, a non-yielding asset, is significant when US interest rates are high. We can expect continued pressure on the precious metal as long as the US dollar stays strong. Create your live VT Markets account and start trading now.

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