1:06 PM 20th November 2023
Market Insight 20 November 2023
Today's Market analysis on behalf of Samer Hasn Market Analyst and part of the Research Team at XS.com
Euro continues to record some gains against the US dollar this morning, by more than 0.17%, reaching the level of 1.09405 at the peak of the rises this morning, which represents a new highest level that we have not seen since last August. While some minor declines followed.
While the euro was under a little pressure this morning, with more indicators about inflation receding and returning to its correct path, with the continued decline in the Producer Price index (PPI), which may support hopes of recording a further decline in consumer prices in the future.
The index recorded a decline of 11% last October compared to the same month of the previous year and a slight decline of 0.1% compared to September of the same year, according to data provided by Destatis.
The biggest pressure on the decline in producer prices during October was the sharp decline in energy prices, which fell by 27.9% on an annual basis, and reached their peak in September of last year. While the noticeable decline in energy prices prompted a decline in electricity prices by more than 36% YoY as well.
With the exception of energy items, producer prices recorded a slight growth of 0.2%, which is the lowest in three years.
Also, the prices of natural gas sold to various segments of consumers decreased by 29.6%. In addition, many commodities recorded significant double-digit declines, whether wood, metals, or animal food. In contrast, we have witnessed a significant double-digit increase year-on-year for the prices of building materials and some types of foods.
These numbers appear to be encouraging and may reinforce expectations that inflation will continue to decline towards its targets. On the other hand, the continued rise in the prices of capital goods may slow this decline in inflation somewhat, as it rose by 4.4% on an annual basis due to pressure from the rise in the prices of machinery, vehicles and trailers.
Today's producer price figures followed the Eurozone CPI figures, which witnessed stability compared to previous readings, also after a set of economic figures that indicate more confidence in the region’s economy and its ability to recover and return to growth.
Today's data also came less than a week after the German Wholesale Price Index (WPI) figures, which recorded the fastest pace of decline since last May, by 0.7% on a monthly basis.
In bond markets, European ten-year government bond yields recorded some increases in light of today's data, recording the level of 2.614% at the peak of the rises at approximately 8:30 this morning, while they returned to the level of 2.587% later.
This week, we await a number of statements by European Central Bank officials, led by Christine Lagarde. The markets are also awaiting a number of preliminary data on manufacturing and services purchasing managers' indices for euro zone countries, which will also help shed more light on the trends of restoring growth to the region's economy.