German inflation drops in November

The euro plunged to 1.087 on expectations of early ECB rate cuts following cooling inflation data

By Nadia Elbilassy | @Nadia Elbilassy | 1 December 2023

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  • Euro tumbles on lower-than-expected inflation in the euro zone, sparking expectations for early ECB rate cuts.

  • Dollar rebounds from a three-month low, despite being on track for its most significant monthly decrease in a year.

  • US core PCE index slows down in October, to 0.2% from 0.3% in September.

On the Market Watch!

Disinflation in Germany

The euro tumbled overnight following lower-than-expected inflation in the euro zone this month, intensifying expectations for early interest rate cuts by the European Central Bank.

Consumer price growth in the euro zone fell to 2.4%, down from October's 2.9%. Based on the preliminary estimate, the year-on-year headline inflation in Germany has decreased to 3.2% from 3.8% in October. Meanwhile, the European inflation measure has shown a decline to 2.3% year-on-year, down from 3.0% in October.

The primary factors contributing to the decline in inflation rates actual decreases in energy prices and reductions in prices for leisure, entertainment, and hospitality services. The sole concerning trend was the monthly uptick in food prices.

The dollar rebounded from a three-month low, although it remained on track for its most significant monthly decrease in a year.

US PCE slows down

The core personal consumption expenditures index slowed down in October, edging lower after a 0.3% increase in September. The PCE price index witnessed a 3.0% increase over the 12 months leading up to October, representing the smallest year-on-year gain since March 2021.

In the same context, Initial jobless claims remained low, at 218K increasing 7,000 from the previous weeks revised level of 211K.

According to the CME Fed-Watch Tool, U.S. rate futures have factored in approximately a 47% likelihood of a rate cut at the March meeting next year. Data from LSEG indicated that the rates market anticipates roughly 100 basis points (bps) of cuts by the conclusion of 2024.

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