09.01.202610:12 Forex Analysis & Reviews: Stable inflation expectations give ECB room to keep rates unchanged

Consumer inflation expectations in the euro area remained stable in November, allowing the European Central Bank to keep interest rates at current levels.

According to the ECB's monthly survey published on Thursday, households expect prices to rise by 2.8% over the next 12 months. Expectations three and five years ahead were unchanged at 2.5% and 2.2%, respectively.

Stable inflation expectations are important for the ECB because they directly influence consumer behaviour and investment decisions. If consumers expect prices to keep rising, they tend to spend more now, which can feed further inflation. Conversely, steady expectations allow the ECB to pursue a more predictable monetary policy.

The ECB stressed, however, that it remains committed to price stability and stands ready to act if needed. In the coming months, the bank will monitor economic data closely — including inflation, employment and growth indicators — to assess whether policy adjustments are required.

According to the latest reports, euro area inflation eased slightly in December to the ECB's 2% target, while underlying inflationary pressures also moderated. Services prices remain a concern, however, in part because wages have been rising strongly.

Borrowing costs have been unchanged since June 2025, and investors and economists do not expect further moves in the near term. Policymakers have signaled no immediate need for action, while emphasizing that uncertainty in the economy persists.

A technical outlook for EUR/USD suggests that buyers should consider reclaiming 1.1660. That would open the way to test 1.1681. From there a move to 1.1705 would be possible, though advancing without support from major players may prove difficult. The extended target is the high at 1.1725. On a decline, meaningful buying interest is likely around 1.1641. If buyers do not appear there, it would be prudent to wait for a new low at 1.1619 or to open long positions from 1.1591.

As for GBP/USD, its buyers need to capture the nearest resistance at 1.3435. That would allow a move toward 1.3460, above which a breakout would be challenging. The extended target is the area around 1.3488. Should the pair fall, bears will attempt to seize control at 1.3403. If they succeed, a break of that range would deal a serious blow to bullish positions and could push GBP/USD down to 1.3373, with scope to extend to 1.3341.