Breaking: Eurozone Preliminary HICP inflation softens to 2.4% YoY in November vs. 2.7% expected

The Eurozone Harmonised Index of Consumer Prices (HICP) increased 2.4% on an annual basis in November, down from October’s 2.9% rise, the official data published by Eurostat showed on Thursday. The data missed the market expectations of a 2.7% print.

The Core HICP inflation eased to 3.6% YoY in November, as against October’s 4.2% uptick. The market consensus was for a 3.9% increase in the Core HICP.

On a monthly basis, the bloc’s HICP dropped 0.5% in November vs. a 0.1% increase registered in October. The core HICP inflation came in at -0.6% MoM in the reported month, compared to a 0.2% acceleration reported in October.

The European Central Bank’s (ECB) inflation target is 2.0%. The old continent’s HICP inflation data significantly influences the market’s pricing of the ECB interest rate outlook.

Following softer-than-expected German, French and Spanish inflation data, the “ECB euro short-term rate (ESTR) forwards priced in a policy rate reduction of over 110 basis points (bps) in 2024 from around 95 bps the day before. They also discount an around 95% chance of a first 25 bps rate cut in April 2024,” according to Reuters.

Key details from the Eurozone inflation report (via Eurostat)

“Looking at the main components of euro area inflation, food, alcohol & tobacco are expected to have the highest annual rate in November (6.9%, compared with 7.4% in October), followed by services (4.0%, compared with 4.6% in October), non-energy industrial goods (2.9%, compared with 3.5% in October) and energy (-11.5%, compared with -11.2% in October).”

Separately, the Eurozone Unemployment Rate for October came in at 6.5%, as expected.

EUR/USD reaction to the Eurozone inflation report

The Euro is accelerating its downside momentum on softer-than-expected Eurozone inflation data. EUR/USD is trading 0.38% lower on the day at 1.0925, at the press time.