EURUSD Price Analysis: Euro Rallies on Upbeat Inflation Data

The EURUSD currency pair was trading up over 50 pips at writing as the euro rallied against the US dollar following the release of upbeat inflation data from the euro area. Earlier today, the eurozone core inflation data came in at 5%, meeting analysts’ consensus estimates.

Furthermore, the headline inflation figure for November fell to 10%, beating analyst estimates of 10.4% and the previous figure of 10.6%. This was the first time since November 2021 that inflation in the eurozone has fallen, which is a good sign for the region.

However, investors still expect the European Central Bank (ECB) to continue hiking rates at its December meeting despite the falling inflation. Recent comments from ECB Governor Christine Lagarde indicate that she still thinks inflation hasn’t peaked; hence, the bank will keep increasing interest rates for now.

Therefore, today’s rally indicates that while the US Federal Reserve may be ready to start tapering its rate hikes, the ECB still has a way to go before it can start paring its rate hikes, given that it was late to the party. 

The EURUSD currency pair’s rally comes two days before the release of the US nonfarm payroll data for November on Friday, which will significantly impact the US dollar and its peers. In addition, the release of the weak US ADP nonfarm employment data, which missed expectations, also boosted the pair. 

According to the ADP, US nonfarm employment increased by 127,000 jobs in November, missing analysts' estimates of 196,000 jobs by a wide margin. The weak ADP data could indicate the upcoming NFP data but does not guarantee comparable data. 

In the past, the nonfarm payroll data often went entirely against the ADP data, which in this case, would be positive given that the ADP data missed expectations. However, only time will tell. For now, the euro remains more potent than the US dollar. 

*This is not investment advice. 

EURUSD price chart.

The EURUSD currency pair was trading up 55.1 pips (0.54%) after the release of upbeat inflation data.