- US CPI released yesterday came out broadly inline with market expectations and gave the greenback a further boost against its G10 peers. The October headline printed at 0.2% with core coming in at 0.3% pushing treasuries higher. The data suggests that the FOMC is on track to deliver another 25bp cut when they meet for the final policy meeting of the year. This expectation was backed up by Minneapolis Federal Reserve Bank President Neel Kashkari, who yesterday said that he is confident that inflation is headed down, noting that the CPI data ‘confirms’ that downward path. Markets are now pricing an 80% chance of an interest rate cut when the FOMC conclude their meeting on December 18.
- After trying to hold above stubborn support around 1.06, EURUSD finally broke the key level spurred on by the US inflation report. The euro fell to its lowest level in a year falling as low as 1.0535 before consolidating in the mid 1.05’s. The next level of support comes in at 1.0522 ahead of the next psychological ‘round number’ at 1.04. The old support at 1.06 now becomes initial resistance although many analysts expect the pair to fall further. This morning markets await the release of euro area Industrial Production data which is likely to show activity suffering a further set back with little sign of picking up towards the end of the year. The ECB Monetary Policy Account is released at lunch time and analysts will be examining the accounts seeking further clues on whether another interest rate cut is on the cards in December.
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