Watch inflation for negative EUR catalyst
EURUSD is fast approaching the 1.4000 level where our economists anticipate rising ECB concern. However, some ECB speakers (like Asmussen) last week made clear that the exchange rate was only a concern to the extent it shifts inflation risks to the downside. This week’s October German preliminary CPI should show the HICP rate slowing to 1.5% y/y from 1.6% last month. A softer print would place EUR under pressure as the market increases the probability that the ECB downgrades its assessments of risks surrounding inflation (from “balanced” to the “downside”) at the November 7 meeting. This risk seems
under priced at the moment. We also remain attentive to ECB speakers, with board members Coeure, Constancio, and Asmussen on the schedule.
Read the full report: FX Daily
BNP Paribas