Euro-zone inflation fell to a 2-year low according to today’s release by Eurostat. Consumer prices fell 2.2% in November from November 2011, which was both as expected and lower than October’s 2.5% inflation. Consumer prices fell an expected 0.2% in November when compared to October.
Food prices rose 0.4% in November and household equipment prices rose 0.1%. Meanwhile, transport prices dropped 1.3% over November. Greece saw the lowest annual inflation in November, with consumer prices up 0.4% on an annual basis; Estonia saw the highest inflation at 3.8%.
Last week, the European Central Bank decided to keep the interest rate at 0.75%, despite mounting pressures for further rate cuts from two straight quarters of negative growth and predictions for further weakness in the first part of 2013. Lower inflation rates would make it easier to for the central bank to decide to cut its interest rate in the next meeting, which would be Euro negative, but ECB President Draghi says he prefers to use tools like the OMT bond purchase plan over further interest rate cuts. ECB’s Nowotny said today that he sees lower Euro area inflation in 2013 and 2014.
Also released today, Euro-zone unemployment fell 0.2% in the third quarter, which was better than the second quarter’s unchanged unemployment. Also, today’s flash estimate of Euro-zone PMI’s reported the highest composite output index in nine months.
In Spain, the overall public debt to GDP level rose to 77.4% in Q3. Earlier in the session, PM Rajoy said Spanish banks will pay back loans themselves. He also complimented Germany’s position as being very constructive.
The Euro was not significantly impacted by the inflation, and EURUSD continues to trade near 1.3080 in forex markets. The Euro fell from a new high above 1.3100 as a mixed set of Euro-zone PMI’s were being released. The 3-month high of 1.3139 could continue to provide resistance; a 10-month falling trend line could provide support around 1.3065.
EURUSD Daily: December 14, 2012
--- Written by Benjamin Spier, DailyFX Research