Euro strengthened broadly after Eurozone's flash CPI revealed stronger-than-expected increase in headline inflation, while the decline in core inflation has come to a halt. This data, coupled with the better-than-anticipated GDP figures released yesterday, has provided substantial support to the hawks within ECB. There appears to be no immediate need for ECB to accelerate monetary easing efforts. A 25 basis point rate cut at the December meeting is being solidified as the baseline. Yen is also displaying firmness following BoJ decision to maintain its current monetary policy earlier today. Additional support emerged from Governor Kazuo Ueda's remarks during the post-meeting press conference. Markets continue to anticipate the next rate hike to occur in the first quarter of next year. with some interpret Ueda's comments as leaving the possibility open for a December hike. However, two significant uncertainties remain: the formation of Japan's new government after the recent indecisive elections, and the outcome of the US presidential elections next week and their implications for Japan. Conversely, Dollar is on the softer side stronger-than-expected core PCE inflation reading. For the greenback to regain the dominance observed in recent weeks, robust non-farm payroll data due tomorrow would be essential, especially ahead of next week's elections..... |