Ulrich Leuchtmann, Head of Currency and Commodities Research at Commerzbank, noted that Eurostat is scheduled to release euro zone inflation data for October today.
The euro can recover even if inflation in the euro area does not rise
“After yesterday’s unexpectedly positive German data (and the euro being the strongest G10 currency yesterday), markets may be in store for a similar surprise across the currency area today. If this happens, it will test the market’s view of the ECB.
“No matter what you think about the ECB, there is no room for rate cuts if inflation pressures remain high. Even most of the ECB’s critics would probably agree with this.”
“Higher inflation today would complete the recovery trend in the euro that we have observed since the publication of the PMI index. These have not been surprisingly good. They have not fallen any further. If today’s market reaction follows a similar pattern, inflation in the euro area will not need to be particularly high for the euro to continue recovering.
