As we have mentioned 2 weeks ago, the 2.6% y/y EU CPI could increased the market expectations of an Inflation pressure in Euro zone can force the ECB to open the door for further single currency appreciation amid these current high oil prices. The figure is away from the 2% ECB target.
The interest rate outlook between contained the market sentiment to enable the single currency to make a new all time high well above 1.47 as The ECB repeated comments that there are inflation upside.
Yesterday, the ECB said the same and it is understood that the credit market worries are still in the sight and there is no need to tight right now. In the same time, Ben Bernenke's soft testimony tone increased the market expectations of another cut by the end of this year in spite of the recent Fed's assessment which indicated further Fed's inflation getting along with signs of a slow growth. These same testimony highlighted the market worries that the worse is still ahead and there is a problem getting out of the stock market again forming a new wave of carry trade unwinding this time looks pushing the greenback lower than 110 versus the Japanese yen. I see that the market is well-priced in weak fourth quarter growth figures and this can underpin the unwinding further and may support the US treasuries buying and the greenback to have a room for just a correction ahead!
Best wishes
FX Consultant Walid Salah El Din Mob: +20 12 465 9143 E-Mail: snipped-for-privacy@fx-recommends.com