EUR: Focus on inflation – ING

US developments will again dominate EUR/USD this week. But on the eurozone side, the focus will be on the August inflation data released on Tuesday. Consensus expects a third month of 2.0% year-on-year readings, although national readings have been diverging a little, ING's FX analyst Chris Turner notes.

Events in the US tp determine the path of EUR/USD

"German data has already come in a little stronger than expected, whilst French and Italian data have been a little softer. None of this, however, has made much of an impact on market expectations that the European Central Bank will hold the deposit rate steady at 2.00% on 11 September."

"Over the weekend, we have seen the ECB doves (e.g., Olli Rehn) fighting back by cautioning against complacency of the risk that inflation undershoots again. But unless we see some big downside misses on the data or French debt spreads blow through 100bp against German Bunds on the French budget saga, we doubt ECB easing expectations will shift much this week."

"Instead, events in the US will determine the path of EUR/USD. We think there are enough dollar negatives out there for EUR/USD to trade through 1.1750 resistance and give the year's high at 1.1830 a good test."