Danske Bank A/S expects the euro to weaken gradually from around $1.12 against the dollar, with slower euro area growth and higher inflation forming the backdrop to this week’s central bank decisions. Its Oct. 26 research note gave no exchange-rate target or deadline for the forecast.
S&P Global’s Flash Eurozone PMI Output Index fell to 51.9 in October from 53.1 in September. Both readings were above 50, indicating growth in surveyed output, but the lower reading points to a slower pace. S&P Global said a renewed decline in French business activity contributed to the slowdown.
The October survey still marked a fourth consecutive monthly increase in activity. S&P Global said the October survey was consistent with GDP growing at a roughly 0.3% quarterly pace, a survey-based indication for the fourth quarter rather than an official GDP figure.
Annual euro area inflation rose to 3.8% in September from 3.2% in August, Eurostat said. S&P Global reported that higher energy costs pushed up manufacturers’ input prices, while businesses charged customers more to preserve margins. It also said rising living costs were discouraging spending.
Danske Bank found limited evidence that energy prices were feeding through to services price measures. Its assessment concerns a different measure from the manufacturing costs and broader price pressure described by S&P Global.
The ECB’s deposit rate has stood at 2.50% since Sept. 16. Danske Bank expects the Fed to hold rates Oct. 28 and the ECB to do the same Oct. 29, followed by an ECB increase in December. The ECB has said its decisions will depend on incoming data and that it has not committed to a rate path.
The U.S. Bureau of Economic Analysis is scheduled to release its advance estimate of third-quarter GDP on Oct. 29. Eurostat’s preliminary estimate of euro area third-quarter GDP is due Oct. 30.
