Forecasts For Eurozone Inflation Rose To 7-Year Peaks, Exceeding The ECB’s 2%

As a result of high prices and distribution network constraints, Eurozone inflation forecasts reached 2.0509 percent on Tuesday, the highest level in seven years. Following many months of strong inflation numbers in the Eurozone, inflation forecasts among bondholders on the old continent have soared over the European Central Bank’s (ECB) objective of 2 percent, according to the European Commission.

However, the European Central Bank’s  officials have continued to dismiss worries over increasing inflation, as the central institution’s plan to withdraw economic support initiatives has taken center stage this week. “Rising inflation contracts will be a significant theme at the European Central Bank’s meeting on Thursday,” said analysts at ING Bank. “As a result of the continuing inflation panic, perceptions are shifting in favor of stricter policies, and any resistance by the ECB may be limited to the extreme front-end of the pricing curve.”

US inflationary pressures, as assessed by the 10-year breakeven rate of inflation as reported by the St. Louis Federal Reserve statistics, rose to levels last seen in August 2006 by the conclusion of Monday’s North American activity,” according to the Wall Street Journal.

EUR/USD Seems Fragile Near 1.1600 Despite The Stronger Dollar

The EUR/USD is trading near 1.1600, as the Euro is on the back foot against a rising Greenback. Enduring US-China discussions and stimulus advancements cheer the markets. Divergence in Fed-ECB policy: The Euro has depreciated as a result of Fed-ECB policy divergence. Traders anticipate the US Consumer Confidence data.

EUR/USD CHART Source: Tradingview.com

It appears that the EUR/USD has breached the climbing trend line formed in mid-October. The Relative Strength Index (RSI) marker on the same chart also fell below 50, confirming the short-term bearish shift. This week’s losses could extend to 1.1570 (stationary level) and 1.1525 (2021 low). The first resistance level is 1.1620 (Fibonacci 23.6 percent retracement of the September decline, 50-period SMA), followed by 1.1650 (200-period SMA) and 1.1670.(Fibonacci 38.2 percent retracement).

Overview Of The Basics

Markets have been reminded of the joint currency’s weakness, as the EUR/USD pair has fallen to a new weekly low near 1.1600. German GDP growth is now likely to be “substantially below” the June prediction of 3.7 percent, according to the Bundesbank’s monthly report. The German central bank also predicted a slowdown in the fourth quarter due to supply chain concerns and a loss of impetus in the service sector. Moreover, the IFO survey revealed that German business sentiment deteriorated in October.

Recent events, according to Spanish central bank director Pablo Hernandez de Cos, point to a major lower revision of the economic estimate for 2021. Thursday’s Fiscal Policy Decision Report is expected to reaffirm to markets that the ECB’s loose policy will continue into next year. Unless the ECB sends a startling hawkish signal, the Euro will continue to struggle to beat its peers, particularly the Greenback. The September New Home Sales and October Consumer Confidence figures from the Conference Board will be released today.

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