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EUR/USD Takes a Nosedive as Near Zero CPI Fuels ECB bets

EUR/USD Takes a Nosedive as Near Zero CPI Fuels ECB bets

Oded Shimoni, Junior Currency Analyst

Talking Points:

  • The Euro lost more than 0.35% versus the US Dollar
  • Eurozone headline CPI and Core CPI both printed figures below expectations
  • Speculation amplified on possible ECB actions tomorrow

See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.

The Euro-Zone’s Consumer Price Index (CPI) fell below expectations today as the preliminary headline reading came unchanged at 0.1% in November, below the expected 0.2%. Core CPI, which strips out volatile elements like food and energy prices, weakened to 0.9 percent, below economists’ forecasts for an unchanged 1.1%. Perhaps more worrying was the slowdown in the Core figure, which came below the prior reading and painted a problematic growth picture for the Euro-Zone coming into tomorrow’s all important ECB announcements.

The data today coupled with weaker global growth puts in question the central bank’s ability to achieve its mandate for inflation of close, but below, 2%. The figures came a day prior to the ECB’s rate decision, in which the central bank is widely expected to announce further QE, and perhaps even cut its deposit rate (which now stands at minus -0.2%) further down in negative territory. Given the numbers today, the ECB is perceived as far from achieving their target at the moment, which may have sparked short selling of the currency in anticipation of further action.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.