On Tuesday (Nov 1), subsession, / oscillated downward, temporarily traded at 0.9946, down 0.20%.
Euro zone inflation data hit the market’s cognitive ceiling again, hitting 10.7 percent on an annualized basis in October and looking a long way from bringing inflation back to target.
Energy prices continued to drive eurozone inflation, while food and imported industrial goods prices also rose sharply.
Policymakers are also concerned that underlying price growth, excluding food and fuel prices, has continued to accelerate, pointing to widening price pressures and increasing risks of high inflation becoming entrenched.
In the current inflationary environment, higher interest rates are essential.
The latest figures show a 2.1% annualised rate in the third quarter and a 0.2% quarter-on-quarter GDP rate.
The ECB has already raised interest rates by 200 basis points in the past three months, and Commerzbank believes that current economic data support another big rate hike, possibly by another 75 basis points in December. The ECB may be slowing down because of the recession, but eurozone inflation may not have peaked yet.
This increases the pressure on the ECB to raise the key significantly further.
Monday’s drop above 0.9870 was supported, while gains below 0.9970 were blocked, suggesting that short gains in Europe and the US could be followed by a continuation of the downward trend.
If the upside in Europe and America is blocked below 0.9945 today, the downside target will point to 0.9850-0.9815.
