Forex Market: EUR/USD off one-week high as ECB rate hike expectations heighten recession concerns, CPI inflation at record levels

EUR/USD came off recent one-week highs on Monday, as expectations for another sizable interest rate hike by the European Central Bank later in October reinforced concerns the Eurozone economy could enter a recessionary period.

Last week, the annual CPI inflation in the Euro Area was reported to have accelerated to 10.0% in September from 9.1% in August, while the median analyst estimate had pointed to CPI increase of 9.7%. The September figure has been the first double-digit inflation ever recorded.

“The ECB is still going to have to go hard … for me, Europe and the UK, it’s less about relative interest rate dynamics, and more about growth dynamics,” Chris Weston, head of research at Pepperstone, was quoted as saying by Reuters.

“I think what we’re starting to try and do now is look at markets where we can price inflation or start feeling a bit more confident about the trajectory around inflation. I think the U.S. falls into that category.”

The US Dollar Index was little changed at 112.182 on Monday.

The key US Non-Farm Payrolls report for September is due to be released on Friday.

On today’s macroeconomic front, investors will be paying attention to a cannonade of Manufacturing PMI reports, including out of the Euro Area and the US, which will offer insight into global economic outlook.

As of 7:52 GMT on Monday EUR/USD was edging up 0.10% to trade at 0.9810. Last week, the major Forex pair climbed as high as 0.9854, which has been its strongest level since September 22nd (0.9907).

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.9796
R1 – 0.9858
R2 – 0.9916
R3 – 0.9977
R4 – 1.0039

S1 – 0.9739
S2 – 0.9677
S3 – 0.9619
S4 – 0.9562