European FX Open - EUR/USD hovers near mini range lows pre-ECB

EUR/USD takes centre stage today.

Trading near the bottom of its recent 1.1155 - 1.1002 range, the ECB is widely expected to lower its key rate by -25BPs to 3.5%, but it’s expected to deliver minimal guidance on the pace and extent of further action with inflation not yet fully defeated.

It will be interesting to see whether Lagarde makes any concessions to recent much slower inflation results or she continues to worry on stubbornly persistent price pressures, particularly in the services sector, where wages are still rising materially.

Once again USD/YEN enjoys a surge of dip demand, tentatively bottoming at Nakagawa's inspired 140.71 low yesterday to a rebound high of 142.95 overnight even as BOJ Board Member Tamura indicated the Bank needs to raise its benchmark rate more aggressively than many economists have been expecting, noting that the neutral policy rate in Japan is 1% or higher. However, perhaps there was some negative YEN response to the first slowing in Japan PPI in eight months in August at 2.5% y/y vs the 2.8% forecast and 3.0% result the month previous.

Also today and at the top of the hour is the Swedish CPI report for August. CPIFis seen at 1.4% y/y vs 1.7% the month previous, with CPIF ex-energy staying at 2.2% y/y. The data is unlikely to derail the Riksbank’s easing plans as price gains will likely remain well contained below the 2.0% target rate into 2025.

On a key day, can EUR/SEK continue to hold above its 200-dma, at 11.4007 last?

In the second half, US PPI and initial claims lead.

PPI should follow a similar path to CPI, with 0.1% m/m and 1.7% y/y estimates, with the core also expected unchanged at 2.4% y/y. Airfare prices continue to weigh, but health care is expected to stay sticky, particularly in October and likely adjustments to Medicare reimbursement rates. Claims are seen unchanged at 227k.

Note SNB's Jordan is a scheduled speaker, this afternoon, too.

Elsewhere, all US stock futures are small in the green at the time of writing, led by the +0.2% NASDAQ.

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