Euro area headline inflation likely to have stayed close to ECB’s 2 pct target in November

The preliminary figures of euro area inflation for the month of November is set to be released tomorrow. Lagged effect of increased prices of energy and a subdued euro is expected to keep inflation close to the ECB’s 2 percent target.

According to a DBS Bank research report, the headline inflation is likely to have risen 2 percent year-on-year in the month, with year-to-date rate tracking 1.7 percent close to the full-year forecast. Core inflation rate is expected to continue trailing the headline inflation rate, rising 1.1 percent in the month.

“Despite on-target inflation, financial metrics of inflationary expectations (5Y5Y swaps) remain relatively benign at 1.6-1.7 percent in the past 3 quarters signaling that the markets don’t expect price pressures to go out of hand, which in turn lowers the need for a hawkish policy response from the central bank in the near-term”, added DBS Bank.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bullish at 104.435, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 21.5868. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex