EUR/USD in the crossfire of Presidential debate, US CPI and ECB: The Week Ahead

EUR/USD has managed to recoup some of last week’s losses as we head into Friday’s nonfarm payroll report. But for it to stand any chance of to a fresh YTD high, US CPI likely needs to continue softening and the ECB surprise with a less-than-expected dovish cut on Thursday.

The weekly chart shows that EUR/USD is holding above a 38.2% Fibonacci ratio and considering breaking back above its December high. It we see a daily or weekly close above it, an attack on the December high seems feasible given it is only another 50 or so pips above it.

But what if US CPI failed to roll over and the ECB strike a more hawkish tone? Then we could find that any rally towards the August high becomes tempting for bears to fade into. Ether way, EUR/USD appears to be at a crossroads as we head towards the weekend.

The Week Ahead: Calendar

The Week Ahead: Key themes and events

Presidential debate
US inflation
ECB interest rate decision

Presidential debate (Tuesday)

It is debatable as to how much impact the Presidential debate will have on markets next week, although it is one of those ‘must watch’ events regardless (for possible entertainment purposes, if nothing else). Currently, this is currently the only planned debate although Trump continues to push for three. And desire (or lack thereof) for further debates could change depending on how this one goes.

Tuesday 21:00 ET
Wednesday 01:00 GMT
Wednesday 11:00 AEST

We largely know what we’re getting with Trump regarding policies and approach to such events. This will be Kamala’s first debate, and that could really go either way for her. Trumps votes are also likely already baked into the numbers, making it a ‘make or break’ situation for Kamala, who needs to define herself to the swing votes. And for that I suspect she’ll try hard to appeal to small businesses, given her ambition plan for 25 million small-business applications.

Trader’s watchlist: EURUSD, USD/JPY, WTI Crude Oil, Gold, S&P 500, Nasdaq 100, Dow Jones, VIX, bonds

How Could the US Presidential Election Impact Markets? A 40-Year Study Looking at 5 Key Markets

US inflation (Wednesday)

I write this ahead of an all-important NFP report, has the potential to spark recessionary fears if the numbers disappoint by a wide enough margin. And if they do, it will take the strong out of the next inflation report.

But if inflation continues to soften, it will further bolster dovish-Fed bets, particularly if core CPI dips to 3% or ideally lower. If there are to be any surprises they would likely show up in the monthly reads. But even at 0.2%, both the monthly CPI reads are below their long-term averages. With as print of 0.1% or lower pointing to weaker prints for the annual figures further out.

Also note that producer prices and US consumer sentiment are released on Thursday and Friday respectively. A soft set of inflation figures alongside a deterioration of confidence would bring the ‘hard landing’ scenario back to the forefront, which could weigh on Wall Street indices.

Trader’s watchlist: EURUSD, USD/JPY, WTI Crude Oil, Gold, S&P 500, Nasdaq 100, Dow Jones, VIX, bonds

ECB interest rate decision (Thursday)

It is practically a given that the ECB will cut their benchmark rate by 25bp on Thursday to 4%, with market pricing and economists backing the move. In fact, a Reuters poll also revealed that 83% of economists surveyed expect them to cut again in December. That means they’re looking past recent headlines that some ECM members have very opposing views of the futures path of rates, with some fearing a recession whereas others feel upside inflationary pressure remain. It therefore seems likely that the ECB may deliver a cautious tone when they cut in September and keep their cards to close their chests regarding futures cuts.

Trader’s watchlist: EURUSD, EUR/JPY, EUR/GBP, EUR/CHF, DAX, STOXX

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.