Eurozone inflation rate falls to over 2-year low

The inflation rate in the Euro Area declined to 2.9% year-on-year in October, reaching its lowest level since July 2021 and falling slightly below the market consensus of 3.1%

By Raed Alkhedr | @raedalkhedr | 31 October 2023

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  • Markets await consumer confidence data in the United States.

  • Gold remains near the $1995 per ounce levels.

Inflation in the Eurozone rises by 2.9%

Inflation rates have continued to decrease, reaching their lowest levels in two years. Recent data reveals that the annual consumer price index rose by a mere 2.9% during the current month of October, down from the previous 4.3%. This decrease was in line with expectations of 3.1%.

The consistent decline in inflation growth can be attributed to the robust monetary policies enforced by the European Central Bank in recent times, aimed at curbing the pace of price increases. In fact, inflation rates began their descent from a peak of 10.6% in October 2022.

Notably, during the ECB's most recent meetings last week, they opted to maintain interest rates at their current levels for the first time in about a year, following a series of interest rate hikes. Nevertheless, the bank emphasized the importance of exercising caution and ensuring a sustained deceleration in inflation growth toward the desired levels before announcing the conclusion of the monetary tightening cycle. This approach leaves room open for further interest rate adjustments if the situation necessitates.

With the latest data release today, which reaffirmed a significant slowdown in inflation growth and its proximity to the targeted inflation rate of 2%, there is a growing expectation that the European Central Bank might consider concluding the monetary tightening cycle. This sentiment is further fueled by disappointing data affecting various sectors within the Eurozone and concerns about a potential economic downturn in the future.

However, it's essential to bear in mind that core inflation remains above 4%, which is double the targeted inflation level. As a result, the European Central Bank may need to witness a slowdown in wage inflation, and this could take a longer time to materialize.

Gold stabilizes as markets await decisions from the Federal Reserve tomorrow

Gold prices held steady during Tuesday's trading, with the market eagerly anticipating the Federal Reserve's decisions in its November meeting scheduled for tomorrow. Nonetheless, despite maintaining its stability within its overall upward trajectory, gold is poised to record its most significant monthly increase in a year, driven by mounting geopolitical tensions between Palestine and Israel.

During today's spot trading, gold remained unchanged at the $1995 per ounce mark, while futures contracts for the precious metal were trading at $2006 per ounce.

The conflict in the middle east has heightened global fears and uncertainty, resulting in increased demand for gold as a safe haven asset. This surge pushed the price of gold to levels as high as $2010 per ounce last Friday, although it subsequently relinquished some of these recent gains.