Euro extends gains nearing four-week highs amid hot Eurozone Inflation figures

EUR/USD extends its recovery from lows near 1.1100, approaching four-week highs at 1.1280.
Preliminary data revealed that Eurozone consumer inflation hit three-year highs in October.
The USD remains on its back foot, weighed down by a sound Democratic victory in the US midterm elections.

The Euro (EUR) accelerates its recovery against the US Dollar (USD) on Wednesday, favoured by the combination of a sound Democratic win in the US midterm Elections and hot Eurozone inflation data. The EUR/USD pair rallied more than 0.6% on the day to reach session highs a few pips shy of the last four weeks' trading range, at the 1.1260-1.1280 area.

TMGM талдауы: Қаржы нарығы жаңалықтары, экономикалық күнтізбе және нарықтық шолулар

Eurozone data released earlier on Wednesday revealed that the preliminary Harmonized Index of Consumer Prices (HICP) accelerated to a 4% year-on-year growth in October, its highest level in three years, from 3.8% in September, fuelled by the fuelled by the high energy prices.

These figures add pressure on the European Central Bank (ECB) to keep tightening monetary policy further over the coming months, and have offset investors’ disappointment about the downward revision to the October HCOB Services Purchasing Managers’ Index (PMI) released earlier in the day.

Trump’s defeat in US midterms punishes the US Dollar

The US Dollar, on the other hand, is struggling amid news of a sound Democratic victory in the US midterm elections held on Tuesday. The Democrats have taken control in both chambers and turned historical Republican strongholds like Kansas and Texas, among others, to their side.

Investors' concerns that the Democrats will implement regulation on the AI sector and put a brake on data center building plans have increased pressure on tech shares and boosted demand for the safe-haven government bonds.

From a different perspective, Rabobank analysts observe the market has interpreted Democratic control of Congress as implying “fewer fiscal giveaways and therefore less inflation,” a combination that “suggests lower yields on Treasuries, which have negative implications for the USD.”

Economic Indicator

Harmonized Index of Consumer Prices (MoM)

The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.