Eurozone inflation for November came in largely as expected, with headline at 2.2% y/y and core at 2.4%, leaving the ECB’s policy stance unchanged. With no market pressure for rate changes and core inflation above target, the Euro (EUR) remains range-bound as the European Central bank (ECB) continues its pause, Commerzbank's FX analyst Michael Pfister notes.

Euro lacks momentum amid stable ECB outlook

"Ultimately, it came as no surprise that the Euro zone inflation data for November failed to breathe life into the Euro. At 2.2% year-on-year, the overall rate was slightly above market expectations, while the core rate of 2.4% was exactly in line with expectations."

"Apart from that, the market is not pricing in any interest rate changes for the ECB until at least April 2026. Yesterday's data provided absolutely no reason to change that. Core inflation remains stubbornly high and is above the ECB's expectations of 2.2%, which argues against further interest rate cuts. A slight decline in rates in the future, as expected by our experts, would bring the ECB closer to its inflation target, but would not be a reason to further lower the key interest rate."

"As long as there are no indications that inflation rates could deviate significantly from the target (in either direction), the ECB can continue to sit back and pause, as our experts expect. It is therefore no surprise that the Euro is currently unable to develop a life of its own; after all, there is a lack of interest rate speculation, which is likely to remain the case for the time being."