The rising of Sep EU CPI preliminary reading to 3% while the market was waiting for 2.5% like August can tackle the ECB form taking a direction to lower the interest rate for stimulating growth in EU and giving easier conditions for borrowing euros to the ailing countries of debt.
The ECB always gives attention to this figure and in its recent 2 meeting, it has smoothed its language concerning the inflation upside risks which looked to it well-anchored over the medium term despite being above its 2% yearly target with no signals to the markets of taking a close hiking action since it has hiked the interest rate by 0.25% on 13th of last July which opened the way to the market speculations of having an interest rate cut this year for stimulating growth in EU specially after the release of the flash reading of September EU Manufacturing PMI index which has gone lower in the contracting territory to 48.4 while it was expected to be 48.6 from 49 in August and also EU Services PMI flash reading index of September which came down to 49 while it was expected to be above 50 at 51.11 from 51.5 in August amid worries about the EU banking system creditability.
But after this jump of inflation in EU which has not been seen since October 2008, the market wants to know whether or not the ECB will take the same direction of inflation tolerance of the Fed and BOE despite reaching yearly in August 3.8% in US and 4.5% in UK.
The Markets are waiting cautiously now for what can be resulted from Greece and the creditors' troika negotiations during the weekend after the Greek government could pass new properties taxes this week as a new deal can open the way for saving Greece again from default next month by giving it the next awaited 8 billions euros part of its bailing out plan.
The markets are waiting now from US for the release of July US personal consumption expenditures index to be up monthly by 0.2% from 0.4% in June and July core PCE price index to be up monthly by 0.2% as the same as June and also the release of August personal income to be up monthly by 0.1% from 0.3% in July and also US personal spending of August to be 0.2% from the rising by 0.8% in July which spurred an optimism wave after falling in June to -0.1%.
The markets will be waiting also today for the release of Sep Chicago PMI which is expected to get down to 56 from 56.5 in August and also for the release of Michigan university consuming sentiment survey which is expected to be 57.9 in September from 57.7 in the preliminary reading and 55.7 in August.
God willing, after EURUSD had broken its recent supporting level at 1.3519, it can face new supporting levels in its way down at 1.348, 1.3414 then 1.3362 whereas it could rebound in the beginning of this week and in the case of breaking it, it can face another supporting level at 1.3243 and breaking it can lead to 1.3088 before the psychological level at 1.3 and 1.2873 which has been recorded low of this year on the 10th of last January while its way for getting up can be met by resisting levels at 1.3693, 1.3795 which could not be broken this week too in a dovish price action sign and in the case of breaking it, the pair can meet another resistance at 1.3843 before 1.3935 which has been reached following the ECB's decision to offer US dollars loans for 3 months to the European banks.
FX Market Strategist
Walid Salah El Din