Eurozone: Disappointing inflation figures - BBH

Analysts at BBH explain that there was some positive economic news from Eurozone, such as the larger than expected decline in German unemployment (-18k) and eurozone unemployment easing to 8.8% from 8.9%.  However, the market took its cues from the disappointing inflation figures, they further add.  

Key Quotes

“The preliminary estimate of November CPI rose to 1.5% from 1.4%.  This was a touch less than expected, but the larger disappointment was with the core CPI.  It was unchanged at 0.9%.  Recall that the core rate bottomed in early 2015 at 0.6%.  The extraordinary monetary policy and the swelling of the central bank's balance sheet has succeeded in barely lifting the core rate off its floor.  Despite the strong real; sector and survey data, which will likely prompt the ECB staff to raise their economic projections that were less optimistic than the EC's forecasts, the disappointment with price pressures will keep the hawks at bay.”  

“The euro is finding good bids ahead of important support seen at $1.1800.  There are nearly 2.5 bln euros in options struck at $1.1840-$1.1845 that expire today that could be in play in the North American morning.  There is also pressure on the euro coming from the sterling cross.  The euro has been sold below GBP0.8800.  It is approaching the low from November 2 seen near GBP0.8765.  Nearby support is seen near GBP0.8740-GBP0.8750.”