Market focus will continue to be on the developments in Ukraine.
We expect euro inflation to decline to a new cycle-low of 0.3% y/y in August. Thedecline should follow due to lower energy price inflation, whereas core inflation isexpected to remain stable at 0.8% and food price inflation should be less negative.The persistent low inflation in the euro area has resulted in a considerable decline inmarket-based inflation expectations during August and another decline in actualinflation could result in new downward movements in inflation expectations. However, we ‘only’ expect a very dovish stance from the ECB together with anannouncement of further details about purchases of Asset Backed Securities.
In the US focus is also on inflation as the release of the PCE figures will provide uswith more information about when inflation will reach the 2% Fed target. Core andheadline inflation are expected to come out at 1.5% y/y and 1.7% y/y, respectively.An increase in food prices is the main reason for the higher headline PCE, whilelower energy prices are pulling in the opposite direction. In the US personal spendingand Chicago PMI will also be released today.
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