EUR/USD: Inflation-driven stabilisation hopes – ING
ING FX Strategist Francesco Pesole argues EUR/USD should be trading above 1.140 based on their models, with recent Euro weakness seen as somewhat overdone. He focuses on September Eurozone inflation and ECB communication as key drivers.
ING FX Strategist Francesco Pesole believes EUR/USD should trade above 1.140 based on their models. Recent eurozone weakness is seen as overdone. September Eurozone inflation and ECB communication are key drivers for his outlook. While core inflation is expected to rise slightly, Pesole doubts it will force the ECB into a more dovish stance.
Current bond market, equity, and oil movements suggest sticking to the dollar uptrend. However, this week could see some stabilization after an overdone decline. September inflation data in the eurozone, with Spain releasing first on Monday and the eurozone on Friday, will be a highlight. Headline CPI is expected to accelerate due to energy price increases, but core inflation may only increase by 0.1 percentage points to reach 2.5%.
Policymakers still prefer maintaining a hawkish market perception as long as energy prices stay high. As the October meeting approaches, ECB speakers may have a greater impact on markets. With data not signaling an immediate need for another hike, pricing will heavily rely on short-term guidance.
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