Euro: Downside risks despite ECB scope – BBH
Brown Brothers Harriman’s Elias Haddad reports EUR/USD has slightly recovered after hitting fresh cyclical lows, with support at 1.1200 and 1.1111.
Brown Brothers Harriman's Elias Haddad notes that the EUR/USD exchange rate has shown a slight rebound after reaching new cyclical lows, with support levels identified at 1.1200 and 1.1111. Despite Eurozone CPI remaining mixed, slightly above target, keeping the European Central Bank (ECB) open to further interest rate hikes, the outlook is influenced by stronger US growth and France's deteriorating budget situation. This combination has resulted in a skewed downside risk for EUR/USD in the coming months.
The September preliminary CPI inflation in Eurozone was mixed, with headline figures running high but underlying measures aligning with expectations. The overall inflation in the Eurozone is above target, and the Federal Reserve's (Fed) growth outlook appears stronger, providing the ECB with more room to implement additional hikes.
This narrows the policy divergence between the ECB and the Fed, putting downward pressure on EUR/USD. However, the stronger US growth and France's worsening fiscal situation heighten the risks on the downside for EUR/USD over the upcoming months.
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