Following a European session rally, the euro fell throughout US trading amidst broad safe-haven flows to the greenback.
Focusing on European fundamentals, it is becoming increasingly clear why Credit Suisse overnight index swaps are pricing in over 125bps worth of rate cuts by the European Central Bank over the next 12 months. The annual rate of Euro-zone CPI growth eased to 3.6 percent in September from 3.8 percent, suggesting that inflation pressures in the region are cooling. Though CPI is still well above the ECB’s 2 percent target, the fact that we’ve seen commodity prices fall sharply eliminates much of the upside risks the central bank was so concerned about previously. Furthermore, with economic growth slowing quite a bit in the region and the credit crisis taking a toll on European financial markets, the ECB has turned their attention away from inflation and onto recession risks. Related Article: Euro/US Dollar Long Term Technical Forecast Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.