EU Consumer Confidence Improves As Consumers Learn To Live With High Energy Prices

Key Insights

• Euro Area Consumer Confidence improved to -22.2 in December. 
• The report provided additional support to the euro. 
• Meanwhile, the yields of the European government bonds continue to rise at a robust pace as traders bet on a hawkish ECB. 

Euro Area Consumer Confidence Report Is Close To Analyst Expectations

On December 20, EU released the flash reading of the Euro Area Consumer Confidence report, which indicated that Consumer Confidence improved from -23.9 in November to -22.2 in December. Analysts expected that Consumer Confidence will grow to -22, so the report was mostly in line with the analyst consensus.

The Euro Area Consumer Confidence has been stuck in the negative territory for the whole year. In September, the Euro Area Condumer Confidence reached a low at -28.7 as consumers reacted to the energy crisis. The blow from the energy crisis was stronger than the damage dealt to consumer mood by the coronavirus crisis.

Consumer Confidence has started to rebound in recent months, but it remains to be seen whether this trend will be continued. January and February are the coldest months in Europe, which may lead to higher energy prices.

EU countries have recently managed to reach consensus on the natural gas price cap deal, which aims to prevent prices from touching new highs during the coldest winter months. At this point, it is not clear whether the efficiency of this measure will be tested in the upcoming months as European natural gas prices are well below the price cap, which was set at 180 euro/MWh.

EUR/USD Tests Daily Highs After Consumer Confidence Numbers

The Euro Area Consumer Confidence report was met with enthusiasm by euro bulls. EUR/USD gained upside momentum and moved towards the resistance level at 1.0660.

Earlier, traders had a chance to take a look at PPI numbers from Germany. The report supported the positive view on Europe’s leading economy as PPI declined by 3.9% in November on a month-over-month basis.

Meanwhile, the yields of the European government bonds continue to rise at a robust pace as traders bet that the ECB will hike rates aggressively to put more pressure on prices. The yield of 10-year Germany’s government bonds increased from 2% to 2.30% in just four trading sessions.

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