Inflation in Germany dropped to 3.2% compared to November 2022 and represented a further decline from October’s 3.8% year-on-year print. More notably, the month-on-month decline was 0.4% and sharper than the -0.2 estimate.
EU inflation data is due tomorrow with consensus estimates indicating another drop in the headline and core measures of inflation. The rate of decline in inflation has markets pricing in rate cuts in 2024 at a similar pace to that expected from the Fed – just over 100 bps worth of cuts. However, inflation could drop more in EU as the European economy hasn’t been anywhere near as resilient as the US, meaning declining activity could accelerate existing economic headwinds, posing a threat to the Euro.