- The US dollar continues to grind higher, with EURUSD slipping further ahead of today’s ECB policy meeting. The pair has been in a steady decline since the end of last month as investors continue to weigh up the size and pace of interest cuts from both the Fed and ECB. The single currency fell again and is now trading on a 1.08 handle after testing 1.12 just a few short weeks ago.
- Ahead of the ECB meeting, markets will this morning focus on the final CPI reading, with analysts expecting a drop to 1.8% from the previous reading of 2.2%. Headline inflation fell below the central bank’s 2% target for the first time since 2021, suggesting that the central bank is on track to continue with its rate cutting cycle.
- A 25bp cut from the ECB is expected today as inflation hovers around the central banks target and concerns around the strength of the euro economy continue to build. Markets expect a second 25bp move at the final policy meeting of the year in December however some analysts suggest that the central bank should be bolder and deliver the same outcome by cutting 50bp today and pausing in December. That would match the Federal Reserve’s recent move; however, such a move may suggest panic from the Governing Council and put the single currency into a tailspin.
- US Retail Sales are on the docket this afternoon along with weekly jobless claims and the Philly Fed Outlook. Retail Sales in September are expected to match August’s modest 0.1% growth as consumer confidence continues to grow at a modest pace as US households remain cautious in the face of ongoing high interest rates and caution ahead of next month’s election.
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