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- EUR/USD: High inflation to dampen the risk of a sharper euro sell-off – MUFG
EUR/USD: High inflation to dampen the risk of a sharper euro sell-off – MUFG
The euro has remained at weaker levels following last week’s European Central Bank (ECB) policy meeting. The release of stronger activity and inflation data from the eurozone are set to prevent a sharp euro sell-off as ECB tightening expectations have been challenged, economists at MUFG Bank report.
Economic data releases keep pressure on ECB to tighten policy
“The latest economic data from the eurozone did highlight that the ECB is still facing a difficult balance when setting policy with inflation continuing to surprise significantly to the upside. It will keep pressure on the ECB to keep delivering larger rate hikes as policy rates remain relatively low and well below inflation.”
“Activity in the eurozone economy appears to have held up better than expected in Q3. While a sharper slowdown is still likely over the winter period, the activity data for Q3 has provided some comfort.”
“The combination of stronger inflation and activity data should help to dampen speculation over an even bigger dovish pivot from the ECB anytime soon, and thereby dampen the risk of a sharper euro sell-off.”
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