Don't count out inflation in determining EUR/USD direction
Oct 30 (Reuters) -EUR/USD hit a 7-session high and neared the 200-DMA Wednesday as above estimate Q3 German and euro zone GDPs eased some concern of slower economic growth, but forex market attention may be shifting toward U.S. and euro zone inflation and its impact on ECB and Fed policy.
U.S. October ADP and Q3 GDP reports suggested employment and growth are in good shape.
Q3 core PCE came in at 2.2% versus estimates of 2.1%, which may leave some investors disappointed at the pace of progress toward sustainably meeting the Fed's target, judging by the rally in U.S. 5-year break even inflation USBEI5Y=RR -- a measure of expected inflation -- to its highest since April 18.
However, rising inflation may become a concern in the euro zone after German October CPI and HICP increased more than expected, which helped rally German 2-year yields DE2YT=RR to a two-week high and also tighten German-U.S. spreads US2DE2=RR.
With inflation possibly becoming an issue again investors may lean towards the Fed and ECB cutting less than expected or perhaps pausing easing cycles.
U.S. September core PCE, the Fed's favored pricing gauge is due Thursday. Above-estimate results could rally U.S. yields and the dollar if traders conclude that the Fed may have to think about fighting inflation again.
For more click on FXBUZ
(Christopher Romano is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
