EUR/USD – Eurozone inflation eases further than expected, US ECI a minor concern

• Eurozone HICP inflation falls to 2.9% in October 
• US ECI rises to 1.1% in Q3
• EURUSD continues to look weak

Inflation in the eurozone fell below 3% in October, with energy and food prices helping to push the headline number even lower than expected. While this is undoubtedly good news, the core number is probably a more accurate reflection of where things stand and the job the ECB still has in reining in inflation in a sustainable manner.

Energy prices in particular are still volatile and base effects in the coming months will likely be less favourable. Underlying price pressures, particularly in services, still have a lot further to fall before the ECB can even consider cutting rates to support an economy that looks destined for recession.

US ECI beats expectations in a blow to the Fed

The euro initially rallied against the dollar after this morning’s releases but that quickly changed following the release of the US quarterly employment cost index. While the 1.1% reading only represented a slight overshoot of the expected figure, that it’s so closely monitored by the Fed will come as a setback to those hoping for rates to fall any time soon.

Euro remains under pressure despite recent gains

The euro is continuing to struggle against the dollar even after a period of consolidation that has brought it some mild relief.

EURUSD Daily

Source – OANDA on Trading View

While it has been consolidating for more than a month now which in theory weakens it as a technical bearish flag pattern, based on the preceding trend, it still doesn’t look particularly promising. And the reversal today prior to the last high and off the 55-day simple moving average just reinforces that.

That said, only a breakout will confirm that which could pose quite a test with it having stood firm so far and falling around 1.05 which has previously been a tricky level of support for the pair.

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