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EUR/USD held around 1.0850 during Thursday’s European session, following Wednesday’s sharp recovery. The major currency pair strengthened as traders reduced bets on a sharp rate cut by the European Central Bank (ECB) at its December monetary policy meeting, after euro zone gross domestic product (GDP) grew faster than expected and German inflation was higher than expected. bet.
Eurozone economic growth accelerated 0.9% in the third quarter of this year from a year earlier, Eurostat reported on Wednesday. The main contribution to the euro zone’s accelerated growth comes from its largest country, Germany, which has managed to avoid a technical recession. The German economy unexpectedly grew by 0.2% compared with the previous quarter, beating expectations for a 0.1% contraction. Meanwhile, Spain’s growth rate was higher than expected, France’s growth rate was also as expected, and Italy’s growth rate was slower than expected.
Germany’s October consumer price index (HICP) flash report accelerated year-on-year growth to 2.4%, higher than the expected 2.1% and the previous release of 1.8%, indicating that the battle against inflation is not over yet.
“The just-released flash forecast for German inflation in October may make some ECB members regret the latest rate cut and the ECB’s new openness to more aggressive rate cuts,” analysts at ING said.
For more clues on the current state of inflation, investors will focus on preliminary Eurozone HICP data for October due out at 10:00 GMT.
Meanwhile, European Central Bank President Christine Lagarde expressed confidence in containing price pressures in an interview with French newspaper Le Monde on Thursday. “The target is within sight, but I won’t tell you that inflation is under control,” Lagarde said. She reiterated her pledge to cut interest rates but stopped short of committing to a specific path.
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