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- MUFG Research sees a scope for further EUR/USD rebound despite the modest dovish pricing for ECB rate expectations after this week's EZ inflation print.
- "For ECB Market participants have become more confident that the ECB will also step down the pace of rate hikes at their next policy meeting 15th December...The latest eurozone CPI report revealed that headline inflation unexpectedly dropped to 10.0% in November although the core rate held at 5.0%. It has added to optimism that inflation is now in the process of peaking out which alongside much weaker activity data over the winter period should encourage the ECB to adopt a less hawkish policy stance," MUFG notes.
- "Nevertheless, a modest dovish repricing of ECB rate expectations is unlikely on its to prevent EUR/USD from continuing to rebound if the broad-based US dollar sell-off," MUFG adds.
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EUR/USD is confounding the bears. There was little follow-through lower since parity was breached.