EUR: Consolidation in order in the absence of any positive EZ inflation shock - ING

Viraj Patel, Research Analyst at ING, suggests that the Dec flash EZ CPI data release will dominate EUR/USD price action ahead of today’s US jobs report.

Key Quotes

“Markets are looking for the headline figure to tick lower to 1.4% YoY; however, given that that this is largely noise around oil-price base effects, the real emphasis will be on core inflation – and how quickly we can get back above the 1.0% YoY mark.”

“Our economists aren’t looking for any shocking  positive inflation surprises in 1Q18 – and gently rising inflationary pressures could be one factor that helps keep EUR/USD contained around the 1.20 level. Yet, as we’ve noted previously, a move up towards 1.25 is only a matter of time – and certainly our EUR/USD forecast of 1.30 by end-2018 is looking less like an outlier by the day.”

“For now, we expect EUR/USD to stay this side of the 1.2167 resistance level (50% retrace of Jun 2014 to Mar 2017 move lower) – especially given the lack of EZ inflation surprises and looming Italian election risks in 1Q18.”