Sticky European Inflation and the Outlook for EUR/USD Amid US CPI Release

EUR: Sticky European inflation

EUR: Sticky European inflation

We have taken the view recently that the market should not be so quick to dismiss the chances of a follow-up 25bp hike from the ECB in September. The market attaches just a 35% probability to that outcome. ING's own survey of consumers in eight European countries confirms that inflation remains very sticky. Most respondents expect inflation to stay high for three years or more.

EUR/USD today will largely be determined by the US July CPI release. The short-term range is now clearly defined between 1.0925 (the 100-day moving average) and the recent high at 1.1040. Our thesis is that today's consensus CPI number may not be enough to trigger a sustained break of the 1.1040 area.

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Topics

eur ecb eur/usd sticky inflation consumer expectations September rate hike 100-day moving average European inflation market probability ING survey US July CPI short-term range recent high consensus CPI number

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