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Euro little changed in a quiet morning trade

Tuesday, Aug 18 2015
It is a steadier morning part of the session for euro with no major data releases. With Greece bailout program being approved, traders are again focused on Eurozone inflation and ECB monetary policy. The latest drop and a weaker long-run target for oil prices mean that the autumn inflation pick-up will be moderated somewhat. However, the fall-out of negative base effects and a gradual increase in core inflation due to weak potential growth still imply a return to above 1% inflation in the euro zone around New Year.
 
The short end of the euro yield curve is kept in check by ECB determination to carry out its QE buying through September 2016. In contrast, the US curve is set for a level shift and steepening as the Fed delivers on policy tightening with a first hike during the autumn (base case is September). Euro-zone inflation is set for a marked rise in H2 (despite the recent sell-off in oil prices) and will be a focal point for the ECB: while Draghi will be keen to focus on ‘inflation trends’, the market may speculate on an early QE exit.
 
Euro is currently being traded around 1.1080 area. Pair is likely to find support around 1.1050 level and resistance above 1.1130 area. Later today, in the US session, Building Permits and Housing Starts figures are scheduled for a release.
More in this category: « UK CPI increased by 0.1% in July Housing Starts at the highest rate since October 2007 »

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