Euro flat as German inflation declines

• German inflation confirmed at -0.4%
• US nonfarm payrolls project to accelerate to 180,000

The euro has edged lower on Friday. In the European session, EUR/USD is trading at 1.0774, down 0.17%. The euro has struggled lately against the US dollar and has slipped 2.2% since November 28.

German inflation confirmed at -0.4%

Germany’s economy is sputtering, so much so that the once proud economic powerhouse is being called the sick man of Europe. Germany boasts the largest economy in the eurozone, and it will be difficult for the eurozone to recover unless Germany recovers from its current malaise. Weak economic conditions have pushed inflation lower and German CPI was confirmed at -0.4% in November, down from no growth in October and matching the consensus estimate. On an annualized basis, CPI eased to 3.2% in November, down from 3.8% in October and matching the consensus estimate.

The fall in inflation is good news for the ECB, as curbing inflation is its number one priority. Eurozone inflation fell to 2.4% in November, down from 2.9% a month earlier and below the market forecast of 2.7%. Core CPI dropped to 3.6% from 4.2% and the positive data has fuelled expectations of a rate cut by the ECB in 2024. The central bank has pushed back against talk of rate cuts and has said it will continue its “higher for longer” rate policy, which means there is a significant disconnect between the central bank and the markets.

Will nonfarm payrolls accelerate?

All eyes are on the US nonfarm payroll release later today. After falling sharply in October to 150,000 from a revised 297,000, nonfarm payrolls are expected to rebound to 180,000. A soft nonfarm payroll report will fuel speculation of a Fed rate cut, which could push the US dollar lower in today’s North American session.

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EUR/USD Technical

• There is resistance at 1.0788 and 1.0822
• 1.0722 and 1.0615 are providing support

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