Ahead Of The October ECB Meeting, EUR/USD Outlook Remains Bearish

(CTN News) – ECB policymakers are on edge as the final Eurozone CPI headline data for September indicate rising price pressures in the Eurozone.

Increasing prices and tighter financial conditions are fueling concerns about a global recession, driving volatility, risk aversion, and demand for safe-haven assets, underpinning the USD’s strength.

Euro area headline inflation for September was revised downward slightly. The preliminary figure was 10.0%, but the year-over-year figure was 9.9%.

Inflation pressures remain too high, putting the ECB in a difficult position given the euro-area’s weak economy and energy crisis.

After the ECB’s 50-bp interest rate hike in July, markets expect a 75-bp rate hike at its next meeting on October 27. The euro would benefit from this, but concerns about a global recession are growing as central banks around the world continue to raise interest rates.

Interest rates in the United States have reached levels not seen since 2008. Federal Reserve has pushed rates into a more restrictive territory to curb inflation by pushing the 10-year yield above 4.10%.

In addition to this rise in yields, the U.S. economy is fundamentally stronger than the Eurozone, resulting in further euro weakness.

On a technical level, EUR/USD advanced during the past two days as investors weighed some positive news items, but the medium-term outlook remains bearish.

There is a short-term range between 0.9540 and 0.9999 on the Daily Chart. Those levels are marked by resistance around 0.9875, which is close to the 100 SMA, and support around 0.9665.

In addition to Eurozone consumer confidence, the ECB will make its monetary policy decision next Thursday, followed by a round of PMI figures on Monday and Germany’s Ifo Business report on Tuesday.

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