Following recent dollar strength following Fed Chair Kevin Warsh's Jackson Hole speech, the Danske Research Team observes that EUR/USD has somewhat recovered over 1.16. While markets anticipate the region's flash inflation, unemployment, and final manufacturing PMI data, they also draw attention to restricted underlying inflation pressures across major euro-area nations.
The pair recovers above the 1.16 threshold.
"We have the August flash inflation data for the euro area. While the German print came in just below expectations, national publications from France and Spain were largely as anticipated in terms of headlines.
"HICP inflation in Germany rose to 2.9% year over year in August (cons: 3.1%, prior: 2.8%), which was little less than anticipated. The information revealed that while services and food inflation decreased, energy and core goods inflation increased, keeping the core CPI at 2.4% year over year.
"Services momentum remained relatively low at 0.15% m/m s, while goods prices grew significantly for the second consecutive month, indicating we are beginning to see some indirect effects from increasing energy prices.a. As was the case in France and Spain last week, core inflation momentum is still restrained at 2.5% 3m/3m SAAR, suggesting that energy costs are not widely transferring to underlying inflation.
Crucially, underlying inflation pressures were kept under control in all three nations: core inflation either decreased or remained constant with a muted velocity. This implies that underlying inflation has not yet been affected by the shock to oil prices. As a result, we anticipate core inflation to drop to 2.4% y/y and headline inflation to increase to 3.2% y/y.
"In the currency market, there was a slight recovery in the EURUSD, which is now above 1.16, while the USDJPY dropped below 160 following the dollar's rise following Fed Chairman Warsh's remarks at the Jackson Hole conference on Friday."
"We also receive data from the euro area on unemployment, which is predicted to remain at 6.3%, and the final manufacturing PMI for August, which is anticipated to validate the flash release of 52.8."
The pair recovers above the 1.16 threshold.
"We have the August flash inflation data for the euro area. While the German print came in just below expectations, national publications from France and Spain were largely as anticipated in terms of headlines.
"HICP inflation in Germany rose to 2.9% year over year in August (cons: 3.1%, prior: 2.8%), which was little less than anticipated. The information revealed that while services and food inflation decreased, energy and core goods inflation increased, keeping the core CPI at 2.4% year over year.
"Services momentum remained relatively low at 0.15% m/m s, while goods prices grew significantly for the second consecutive month, indicating we are beginning to see some indirect effects from increasing energy prices.a. As was the case in France and Spain last week, core inflation momentum is still restrained at 2.5% 3m/3m SAAR, suggesting that energy costs are not widely transferring to underlying inflation.
Crucially, underlying inflation pressures were kept under control in all three nations: core inflation either decreased or remained constant with a muted velocity. This implies that underlying inflation has not yet been affected by the shock to oil prices. As a result, we anticipate core inflation to drop to 2.4% y/y and headline inflation to increase to 3.2% y/y.
"In the currency market, there was a slight recovery in the EURUSD, which is now above 1.16, while the USDJPY dropped below 160 following the dollar's rise following Fed Chairman Warsh's remarks at the Jackson Hole conference on Friday."
"We also receive data from the euro area on unemployment, which is predicted to remain at 6.3%, and the final manufacturing PMI for August, which is anticipated to validate the flash release of 52.8."
