💶🔺 Sticky EU Core CPI Supporting EUR/USD: Cable FX Macro

• The latest batch of inflation figures pointed to further easing in U.S. core prices, the December Y/y metric printed at 5.7%, down from the prior 6.0%. Meanwhile, the euro area equivalent ticked faster at 5.2% Y/y

• The differential in EU and U.S. core inflation has contracted to only half of a percentage point, this compares to a prior spread of 3.7% points during Q1 of 2022

• The chart below has EU-U.S. core inflation differential advanced by 6 months relative to EUR/USD FX rate. Further stickiness from EU core prices could keep the euro supported

• However, we have seen a lag effect developing between U.S. and EU prices. This means that it is possible core prices in Europe are close to peak