Inflation data remains in focus in Europe today

Major currencies are little changed for the most part with only the Japanese yen being the slight mover in the handover from Asia to Europe. It comes after the BOJ policy decision, in which the central bank left rates unchanged as expected.

USD/JPY caught a whipsaw on the decision but is looking to settle slightly lower now. The pair is down 0.4% to 152.85 and starting to creep below its 100-hour moving average of 152.97 currently. That will see buyers lose near-term control if the break below the key level holds. In the bigger picture, it seems that buyers are running into some exhaustion in testing a key Fib retracement level:

That said, price is still comfortably holding above the 200-day moving average (blue line) of 151.50 for now.

Looking to European trading, the euro will remain in focus as we will have more inflation data on the cards. In case you missed the ones yesterday:

• Spain October preliminary CPI +1.8% vs +1.8% y/y expected
• Bavaria October CPI +2.4% vs +1.9% y/y prior
• German prelim HICP 2.4% vs 2.1% expected

The general undertone is that there is an upside tick to price pressures in October. And that should be reflected in the French and Italian readings as well.

The key spot to watch though will be the Eurozone core annual inflation reading. While headline prices are seen nudging higher, the estimate here is that core prices will ease further to 2.6% – down from 2.7% in September.

I would warn though that personally, I’m not too convinced by the estimate. The Spanish and German figures yesterday both showed an uptick in core prices as well and that is something to be wary about. It may be one month’s worth of reading for now but it is evident that there is a bump in the road on the disinflation process.

Traders are now pricing in ~91% odds of a 25 bps rate cut by the ECB for December and that is down from being fully priced in before yesterday. So, that might offer some upside risks for the euro in the sessions ahead.

0700 GMT – Germany September retail sales data0700 GMT – Germany September import price index0745 GMT – France October preliminary CPI figures1000 GMT – Italy October preliminary CPI figures1000 GMT – Eurozone October preliminary CPI figures1130 GMT – US October Challenger job cuts, layoffs

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

This article was written by Justin Low at www.forexlive.com.