The Eurozone Prelim HICP Overview
Eurostat will publish the flash version of the Eurozone Harmonized Index of Consumer Prices (HICP) data for November later this Tuesday, at 10:00 GMT. The preliminary report is expected to show that the headline Eurozone HICP rose by the 2.1% YoY rate during the reported month, while the core gauge edged higher to 2.5% from the 2.4% in October. On a monthly basis, Eurozone inflation and the core HICP stood at 0.2% and 0.3%, respectively, in October.
How could the Eurozone Prelim HICP affect EUR/USD?
Inflation figures released on Monday show no immediate threat of price increases in the biggest Eurozone economies – France, Spain, and Italy. However, German inflation figures came in unexpectedly high, reinforcing the argument for a policy hold by the European Central Bank (ECB). Hence, stronger inflation figures could boost the shared currency and assist the EUR/USD pair to capitalize on an over one-week-old uptrend.
In contrast, the immediate market reaction to a softer print is more likely to be muted amid a bearish sentiment surrounding the US Dollar (USD), which should continue to act as a tailwind for the EUR/USD pair. Furthermore, the divergent ECB-Federal Reserve (Fed) policy expectations suggest that the path of least resistance for spot prices is to the upside.
Technical Analysis
The 100-day Simple Moving Average (SMA) slopes lower, underscoring a muted broader trend, and price remains beneath it, keeping the near-term bias defensive. The Moving Average Convergence Divergence (MACD) stands above the signal line in positive territory, with the histogram edging higher, suggesting improving momentum. The Relative Strength Index (RSI) at 55 is neutral-to-firm. The 100-day SMA at 1.1644 caps the upside for now, and a failure to clear it would preserve downward pressure.
Below the 100-day SMA, sellers retain the upper hand, and rebounds would stall against dynamic resistance, while a decisive close above that gauge could unlock further gains and shift the bias higher. The MACD’s positive tone reinforces buyer interest, and the RSI around 55 indicates balanced conditions with scope to extend if price reclaims the average.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.