Euro: ECB rate hike bets support gains against US Dollar - Scotiabank

Scotiabank analysts say the Euro (EUR) is firmer near 1.1240, slightly off intraday highs around 1.1265, with gains broadly tracking the softer US Dollar (USD) after the US midterms. Eurozone Consumer Price Index (CPI) was confirmed at 4.0% year-on-year, and several European Central Bank (ECB) officials signaled that a December rate hike is likely, while technicians see a broadly positive tone but stress the need for a clear break above 1.1275.

ECB rhetoric keeps December hike live

"The EUR is firmer but trading a little off the peaks made earlier in the day around the 1.1265 zone. EUR gains are broadly in line with the softer USD tone that has emerged in the wake of the US mid-term results."

"Eurozone October CPI was confirmed at 4.0% Y/Y (2.5% for core) while final Eurozone Services and Composite PMIs were marked down slightly to 51.4 and 51.7 respectively on downward revisions to French data."

"ECB Governor Nagel said Tuesday the inflation picture has worsened and that policy would probably have to be tightened in December. His colleague Sleijpen said the Iran shock was more persistent than had been thought – although there were no second-round inflation effects visible at this point – while Governor Kocher said a December rate hike was likely unless circumstances change."

"Neutral/bullish – Firm gains intraday have stalled just shy of noted resistance at 1.1275. Positive price action overall this week so far plus the resilient EUR support in the low 1.11 zone in recent weeks maintain a broadly positive technical undertone for the EUR. But spot needs a clear push above 1.1275 to progress higher and take a run at 1.1350/1.14."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)