Today, we anticipate the release of inflation figures from France, Germany, Spain, and other countries, which collectively represent almost 65% of the Harmonized Index of Consumer Prices (HICP). These figures will offer insights into what we might expect from Friday’s Eurozone inflation data. Michael Pfister, an FX Analyst at Commerzbank, delves into the potential impact of these inflation numbers on the Euro (EUR).
While the Euro could experience some positive movement if national inflation figures exceed expectations today, it’s unlikely to benefit as significantly as the US Dollar (USD) would from a similar surprise in the Personal Consumption Expenditures (PCE) deflator.
For the Euro to react with comparable intensity to the USD in terms of market interest rate expectations, today’s inflation figures would need to exceed expectations by a much larger margin than the PCE deflator. Although the Euro may still see some gains from higher-than-expected numbers, the impact is expected to be less pronounced compared to the Dollar in similar scenarios.