The Consumer Price Index (CPI) in the eurozone remained at 0.1% year-over-year in November, same as the previous month. Markets had expected inflation to rise to 0.2% year-over-year.
However, this was not the factor that moved the EUR/USD exchange rate.
The core inflation index, which excludes volatile food and energy prices, fell to 0.9% year-over-year in November after showing a good increase in October to 1.1% year-over-year. Markets had expected the October level to hold in November, but this did not happen.
This means that regardless of falling oil prices, inflation in the eurozone is under pressure from other factors, and this issue threatens to be caused by more serious factors rather than the temporary ones mentioned by the ECB, which the eurozone will start to eliminate from the beginning of 2016.
As a result, the markets reacted with a natural decline in the EUR/USD rate to 1.058 from 1.062, which it occupied before the release.
With the ECB hinting at the possibility of further economic stimulus through monetary policy, the decline in core inflation appears to be a factor in favor of this decision, which is reflected on the chart – the euro‘s rate against the dollar showed a decrease, experts from ForTrader note.
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FAQ
What is CPI?
CPI stands for Consumer Price Index, which measures the average change over time in the prices paid by consumers for a market basket of consumer goods and services.
What is core inflation?
Core inflation is a measure of inflation that excludes volatile items such as food and energy prices, providing a clearer picture of underlying inflation trends.
How does the ECB affect the EUR/USD rate?
The European Central Bank (ECB) influences the EUR/USD rate through its monetary policy decisions, including interest rates and quantitative easing programs, which can impact the value of the euro relative to the US dollar.
