Euro surges close to 1%, German CPI looms

The euro has started the week with sharp gains. In the European session, EUR/USD is currently trading at 1.0403, up 0.91% on the day.

German CPI expected to rise to 2.4%

Germany’s economy may not be in great shape but inflation has been moving higher and the trend is expected to continue when December CPI is released later today. Inflation rose from 2% to 2.2% in November, its highest level in four months, and is expected to hit 2.4% in December. Service inflation is at 4% and core CPI at 3%, which indicates the battle to contain inflation isn’t over.

Once the locomotive of Europe, Germany’s economy  has faltered badly and has slowed the eurozone’s recovery. Germany’s once mighty auto industry has been hurt by weaker Chinese demand due to the slowdown in the the world’s second-largest economy. As well, China has gained a larger share of the global automotive market, at the expense of German auto exports. Unsurprisingly, Germany’s manufacturing sector is stuck in contraction territory.

Germany’s services sector moved back into expansion mode in December, as the Services PMI rose to a revised 51.3, up from 49.3 in November. The eurozone Services PMI improved to a revised 51.6, up from 49.5 in November. Spain continues to impress with its economic data, as the Services PMI climbed to 57.3, up from 53.1 in November. This marked a sixteenth straight month of expansion and was the highest level of growth since April 2023.

The US releases Final Services PMI later today. The market estimate for December stands at 58.5, compared to 56.1 in November. This points to strong business activity, which has been the linchpin of the US economy.

EUR/USD Technical

• EUR/USD has pushed above resistance at 1.0331. Above, there is resistance at 1.0436 and 1.0564
• There is support at 1.0203 and 1.0098

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