EUR/USD: Historical record for inflation in the Euro Zone

(News Bulletin 247) – The rebound that began on Wednesday on the Euro Dollar currency pair was already thwarted on Friday, as the publication of new inflation figures in the United States approached: the PCE (Personal consumption expenditures price index), the Fed’s favorite measure in its assessment of inflation, its main “enemy” whose presence is becoming established, and which it is combating with an aggressive monetary policy, at the risk of causing the first economy to enter into recession of the planet. See you at 2:30 p.m. for this highly anticipated publication.

Another major publication today, the consumer price index in the Euro Zone, in very first estimates for the month of September. Inflation is once again stronger than market expectations. It is even in double digits (+10%) for the whole of the monetary union on an annual basis, on the widest basket of products (energy, food, alcohol and tobacco included). As a reminder, in August, inflation was 9.1%. As for the main components of inflation in the euro area, energy is expected to experience the highest annual rate in September (40.8%, compared to 38.6% in August), followed by food, alcohol & tobacco (11.8%, compared to 10.6% in August), industrial goods excluding energy (5.6%, compared to 5.1% in August) and services (4.3%, compared to 3.8% in August). This level of inflation is quite simply a historic record in the Euro Zone.

Tensions on interest rates are bound to rise and – isn’t that the almost avowed goal? – weigh on growth, on both sides of the Atlantic. But to what extent? “This is a major unknown” for Jean-Marie MERCADAL, Deputy Managing Director in charge of management and Eric BERTRAND, Deputy Managing Director and Director of OFI AM Management. “There is currently a lag between the solidity of the labor markets, with rather low unemployment rates, and the rapid deterioration of the leading indicators of the economy. Several explanations can be put forward: companies have until now financial situations rather healthy, so much so that they do not lay off workers because of the subsequent difficulty in finding qualified labour.This shortage, which generates salary increases, is moreover one of the major concerns of fed.”

A context still clearly favorable to the safe haven that is the greenback.

At midday on the foreign exchange market, the Euro was trading against $0.9760 about.

KEY GRAPHIC ELEMENTS

The Euro challenge bounce, developed on September 28 and 29 in significant volatility, is already showing signs of running out of steam as it approaches the 20-day moving average (in dark blue). We would prefer to stay out of the spot as long as the signs of a return to the downward trend are not clearer, however. Particularly with regard to the positioning of the 50-day moving average (in orange), a particularly valuable benchmark since mid-February.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 0.9500 USD and the resistance at 0.9890 USD.

CHART IN DAILY DATA

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