Eurozone's flash headline HICP grew moderately by 2.1% In October
Eurozone's flash headline Harmonized Index of Consumer Prices (HICP) rose at a moderate pace of 2.1% on an annualzied basis in October, as expected, against 2.2% growth seen in September. In the same period, the core HICP grew steadily by 2.4%, faster than expectations of 2.3%.
On a monthly basis, the headline and core HICP grew at a faster pace of 0.2% and 0.3%, respectively.
Market reaction
At the press time, EUR/USD holds the recovery move to near 1.1575 came after stabilizing near the two-week low of 1.1550 posted on Thursday.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | 0.07% | 0.00% | 0.14% | 0.17% | 0.31% | -0.03% | |
| EUR | 0.06% | 0.12% | 0.07% | 0.20% | 0.24% | 0.37% | 0.03% | |
| GBP | -0.07% | -0.12% | -0.10% | 0.08% | 0.12% | 0.25% | -0.11% | |
| JPY | 0.00% | -0.07% | 0.10% | 0.13% | 0.18% | 0.30% | -0.04% | |
| CAD | -0.14% | -0.20% | -0.08% | -0.13% | 0.02% | 0.16% | -0.18% | |
| AUD | -0.17% | -0.24% | -0.12% | -0.18% | -0.02% | 0.14% | -0.22% | |
| NZD | -0.31% | -0.37% | -0.25% | -0.30% | -0.16% | -0.14% | -0.36% | |
| CHF | 0.03% | -0.03% | 0.11% | 0.04% | 0.18% | 0.22% | 0.36% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
This section below was published at 07:40 GMT to cover the preliminary Eurozone HICP data for October.
The Eurozone Prelim HICP Overview
Eurostat will publish the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data for October later on Friday at 10:00 GMT.
Eurozone flash HICP inflation is expected to ease to 2.1% year-over-year (YoY) in October, from 2.2% in September. Meanwhile, the annual core inflation is also anticipated to edge down to 2.3%, from the previous 2.4%.
The monthly Eurozone inflation and core inflation were each at 0.1% in September.
How could the Eurozone Prelim HICP affect EUR/USD?
The EUR/USD pair could extend its losses as the Euro (EUR) may weaken if Eurozone flash HICP data meet expectations, while a stronger US Dollar (USD) adds further downward pressure. Mixed German Retail Sales data had little impact on the pair, as monthly sales rose 0.2% while the annual growth rate slowed to 0.2% in September.
The Euro may draw some support from market expectations of no further interest rate moves by the European Central Bank (ECB) this year. The ECB kept interest rates unchanged for the third consecutive meeting, held on Thursday, as expected, noting that the inflation outlook remains broadly stable, the economy continues to grow, and uncertainty persists.
ECB Governing Council member Martin Kocher stated on Friday that “projections show we are on target for a sustained period.” Kocher added that uncertainty remains high, though some data since September has shown slight improvement.
Technically, the EUR/USD pair is trading around 1.1560 at the time of writing. The technical analysis of the daily chart suggests an ongoing bearish bias as the 14-day Relative Strength Index (RSI) remains below the 50 mark. The immediate support appears at the two-month low of 1.1542, last recorded on October 14. Further declines would prompt the pair to navigate the region around the four-month low of 1.1391. On the upside, the pair may approach the psychological level of 1.1600, followed by the nine-day Exponential Moving Average (EMA) of 1.1605.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
