October U.S. core inflation matched the pattern Federal Reserve Governor Christopher J. Waller cited for considering a larger December rate increase, while ING expects Fed policy to weigh on EUR/USD through year-end.
The Bureau of Labor Statistics (BLS) reported Nov. 10 that the consumer price index for all urban consumers rose 0.4% from September. The core measure, which excludes food and energy, increased 0.3%; it had risen 0.3% in both August and September.
Before the release, Waller said he leaned toward a 25-basis-point increase at the December meeting. He said a 50-basis-point move should be considered if October CPI resembled the prior two monthly readings, with core inflation around 0.3% or higher.
Chris Turner, ING's global head of markets and regional head of research for UK & CEE, put possible EUR/USD support at $1.1110, a 50% retracement of an earlier advance. Turner said the level might prompt some speculative investors to close short EUR/USD positions. Turner sees limited prospect of a durable rebound from there.
ING's forecast for the Nov. 11 session put the pair between $1.1140 and $1.1200. In its year-end view, the bank sees a possible move toward the bottom of a $1.10 to $1.15 range. Turner gives the Fed's policy path priority over the seasonal factors that tend to favor the euro in December.
Turner expects the European Central Bank (ECB) to raise rates alongside the Fed in December, but sees less reason for an extended run of additional hikes in Europe. The outlook follows ING's earlier assessment that near-term EUR/USD gains faced a ceiling.
The Federal Open Market Committee (FOMC) is scheduled to meet Dec. 8-9. The BLS is set to release November CPI on Dec. 10 at 8:30 a.m. ET, followed by the ECB's Dec. 16-17 meeting.
