Yesterday’s German inflation rate fell short of expectations, but the euro only experienced a brief dip before rebounding. This reflects the oversold condition of the euro, as mentioned previously, with stronger-than-expected support at the bottom. Given that France’s budget crisis has lowered market expectations for French data, a CPI reading above expectations could trigger a sharp rise in the euro, similar to the yen’s surge this morning.

However, attention should also be paid to Italy’s inflation performance. If Italy’s inflation meets or exceeds expectations, it will also benefit the euro. The key scenario to watch is when inflation data from Germany, France, and Italy show mixed results. In that case, only the overall eurozone data might drive a breakthrough for the euro.

Euro's Resilience Amid Inflation Data Fluctuations

Nov 29 2024