EURO : Still Under Pressure

(Fri, 2 Oct 2020). Euro area inflation remains stubbornly low, according to the initial September data. Annual inflation turned further negative to -0.3% compared to -0.2% in August, while core inflation y/y fell to 0.2% from a prior reading of 0.5%. All today’s readings missed expectations.

This persistent price weakness in the single block will continue to concern the ECB who remain willing to open the liquidity floodgates once more to get inflation back to - and above in the short-term if needed - their mandated level around 2%.

EUR/USD continues to struggle to stay above 1.1700 and yesterday’s print and retreat from 1.1768 may likely be the high point for the pair in the short-term. As I mentioned recently, the double print around 1.1600/1.1610 should continue to act as initial support.

The next driver of price action will come from this afternoon’s US Labor Report (NFPs) with the market expecting further improvement in the US jobs market, albeit from still woefully low levels.

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