There has been no volatility in the EUR/USD pair today as market players anxiously wait for the headline macro event of this week – the US inflation report. As of writing, the euro seems stuck near 0.97 against the USD, where it has traded since yesterday.
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The latest headline inflation figures for Germany, including the CPI and the Harmonized Index of Consumer Prices (HICP), matched the earlier predictions of 10.0% and 10.9%, respectively, for September.
ECB is on course for another hefty hike
The European Central Bank (ECB) officials, who previously sounded hawkish, are now concerned about controlling inflation in the EU while still containing the recession’s problems.
The terminal rate in the eurozone is lower than in the US. Still, European Central Bank (ECB) policymaker Klaas Knot indicated on Wednesday that they need to make a couple more big rate rises before reaching neutral territory, according to Reuters.
Following that, ECB President Christine Lagarde announced on Wednesday that the Governing Council has begun talking about quantitative tightening (QT). However, ECB Lagarde also stated that the interest rate is the most suitable instrument at this time.
US inflation in focus
Investors anticipate that the headline annual CPI will drop from 8.3% in August to 8.1% this month. A little increase to 6.5% from 6.3% in the same period is predicted for the Core CPI, which excludes volatile food and energy costs.
The CPI and the Core CPI are anticipated to come in at 0.6% and 0.2%, respectively, monthly. However, the monthly estimates are believed to depict core inflation more accurately since they are not skewed by base effects.
Notably, investors appear to have anticipated a robust inflation report after August’s surprise by projecting a 0.6% monthly increase today. At this juncture, only a monthly rise in Core CPI between 0.8% and 1% may be noteworthy enough for market players to start speculating about the potential of a 100 basis point rate increase in November and spark a new surge in the US Dollar Index.
Technically speaking, there have been no new developments. Thus, the pair remains in a downtrend, with today’s US CPI possibly pushing the euro below the 0.97 threshold.