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Market update: German inflation drops as disinflationary trend continues

German disinflation persists; US Q3 GDP revised up, overshadowing CPI, as eyes turn to EU inflation.

Source: Bloomberg

Inflation in Germany dropped to 3.2% compared to November 2022; and represented a further decline from October’s 3.8% year-on-year print. More notably, the month-on-month decline was 0.4% and sharper than the 0.2% estimate.

Economic calendar

Source: DailyFX

Anticipation surrounds the EU's impending inflation data – due tomorrow - and its expected to show further declines in both headline and core measures. The ongoing inflation descent has led markets to factor in 2024 rate cuts, mirroring the pace expected from the Fed—amounting to just over 100 bps. Yet, the EU's economic resilience, lagging behind the US, raises concerns of steeper inflation drops. Declining activity may exacerbate economic challenges, posing a potential threat to the Euro."

The inflation print was soon upstaged by the upward revision to US GDP growth, relating to the third quarter, resulting in an intra-day move lower on the five-minute time frame.

EUR/USD five-min chart

Source: TradingView

The daily EUR/USD chart sees the pair pulling back today, after hawkish comments from Fed Board Member Waller, anticipated the first rate cut in the US taking place in three-five months. The dollar sold off notably thereafter. US PCE data tomorrow can further influence the direction of the pair tomorrow, as well as Powell's potential push back to Wallers rate cut comments.

EUR/USD daily chart

Source: TradingView

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