1.08 EUR/USD Support Holds, Despite Lower French, German Inflation
Today there has been some back-and-forth movement in the European session, as traders try to adjust their position before the FOMC meeting in the evening. The USD is presently settling lower ahead of the US session. The euro turned lower again this morning, with EUR/USD falling to 1.0806 versus the dollar before recovering somewhat to 1.0850 now, after the support zone around 1.08 held once again. The Euro fell following the release of French inflation statistics, which confirmed a downward trend in regional prices.
Meanwhile, bond rates in Europe and the United States have fallen, with the former reacting to weak inflation data from France and later from Germany, as shown in the CPI report below. The latest data released by INSEE this morning showed that January French preliminary CPI declined by 6 points, falling to +3.1% YoY vs +3.7% prior.
Germany December CPI by Destatis – 31 January 2024
- December Preliminary CPI (Year-over-Year):
- Actual: +3.7%
- Expected: Not provided
January Preliminary CPI (Year-over-Year):
- Actual: +2.9%
- Expected: +3.0%
CPI (Month-over-Month):
- December MoM: +0.1%
- January MoM: +0.2%
- Expected MoM: +0.2%
Harmonized Index of Consumer Prices (HICP):
- HICP (Year-over-Year) for December: +3.8%
- Expected HICP (Year-over-Year) for January: +3.2%
- Actual HICP (Year-over-Year) for January: +3.1%
HICP (Month-over-Month):
- December HICP MoM: +0.2%
- January HICP MoM: -0.2%
- Expected HICP MoM: -0.1%
The numbers reinforced the decreasing trend scenario in the Eurozone that began last year. The German inflation figures also reflected a similar picture. So, today’s softer CPI numbers reinforce the notion that the ECB would drop interest rates sooner rather than later, especially given that the Eurozone economy is still struggling to start the new year.
So, there has been volatility in the Euro today, but as I mentioned, traders are adjusting positions ahead of the major event later in the day. Meanwhile the change in European bonds:
- 10-year German Bund Yields:
- Decreased by 7.8 basis points (bps) to 2.195%
- Reached two-week lows
- 10-year French Bond Yields:
- Decreased by 8.0 bps to 2.680%
- 10-year Italian Bond Yields:
- Decreased by 7.6 bps to 3.728%
- 10-year Spanish Bond Yields:
- Decreased by 7.7 bps to 3.101%
EUR/USD Live Chart
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