On Friday, the euro completely surrendered its in part significant gains from the previous day. The common currency fell after the publication of the European inflation figures by one percent to 1.1558 dollars. The inflation rate in the euro area, however, continues to rise and in October climbed more strongly than it has been in more than 13 years. Driven by a sharp rise in energy costs, consumer prices rose by 4.1 percent within a year, as the European statistics agency Eurostat announced in an initial estimate on Friday.
The high inflation is causing a lot of discussion in the Governing Council. According to insiders, doubts were expressed as to whether inflation would actually fall below the targeted 2.0 percent mark in 2022, as previously forecast by ECB economists. ECB boss Christine Lagarde admitted after the interest rate meeting on Thursday that the monetary authorities were surprised by the duration of the surge in inflation. But she also said: “We expect inflation to continue to rise in the short term but then to fall over the course of next year”.
In the bond market, the most recent central bank meeting was still an issue. Investors were disappointed that ECB boss Lagarde did not clearly reject speculations on two rate hikes by the end of 2022. “The ECB apparently does not trust its own inflation forecasts,” said analyst Arne Petimezas from the financial services provider AFS. “The market doesn’t either.” Against this backdrop, investors withdrew from European government bonds. This drove the yield on ten-year federal securities up to minus 0.064 percent. The yields of Italian bonds were higher than they had been since July 2020.
The price of oil rose on the commodity market. A barrel of the US WTI was listed 0.6 percent higher.