EUR/USD briefly strengthened but quickly tumbled again following the release of US economic data. But, the Eurozone inflation remain high.

The Euro rose briefly due to the consistently high core inflation data during the European session on Tuesday (October 31). However, EUR/USD quickly fell back to the 1.0560s following the release of Eurozone economic growth and US consumer confidence data.

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The preliminary Consumer Price Index (CPI) report for the Eurozone showed a sharper decline than expected in the inflation rate for general goods. However, core inflation remained robust.

Core CPI grew by 0.2% month-over-month in October 2023, identical to the increase in the previous period. Meanwhile, annual core inflation weakened from 4.5% to 4.2%, in line with consensus estimates.

These numbers have eased market concerns about the prospect of interest rate cuts in the Eurozone. Speculation about an interest rate cut had emerged following the ECB's policy announcement last week.

Bert Colijn, Senior Eurozone Economist at Nordea Bank, suggested that one should not anticipate the ECB to reduce interest rates any time soon. He noted the ECB's desire to prevent errors akin to those from the 1970s, where easing too rapidly resulted in subsequent high inflation.

Unfortunately, the Euro's strengthening was short-lived. Market participants were once again confronted with the reality that the U.S. economy is performing much better than most other major countries, including the Eurozone.

Preliminary data for the Eurozone's Gross Domestic Product (GDP) showed a -0.1% contraction in the third quarter of 2023, while the previous consensus had only predicted a slowdown to 0.0%. The annual GDP growth for the Eurozone also slipped from 0.5% to just 0.1%.

These figures contrast with the United States' GDP data, which accelerated in the same period. Today's data release also indicated that the U.S. Consumer Confidence Index by The Conference Board in October 2023 outperformed market estimates. The actual figure was recorded at 102.6 compared to an estimated 100.0, with the previous data at 104.3.