WIKIFX REPORT: Market Spotlight: EZ CPI Hits Fresh Record Highs

Eurozone CPI Rises Again

Eurozone inflation touched a fresh record high in September, fuelled in particular by soaring costs for energy, according to Eurostat data. Headline CPI was seen breaking out to further record highs at 10% on the month. This marks a further stark increase from the prior month‘s 9.1% reading and come sin above estimates for a 9.7% result. Similarly, core CPI was seen rising to 4.8% from the prior month’s 4.3% and above expectations for a 4.7% result.

With Eurozone inflation showing little signs of slowing down, hawkish ECB expectations remain firmly anchored. Just this week weve seen Goldman Sachs raising its projections for the remainder of the year now pegging two further .75% hikes. With rate projections jumping higher, EUR looks likely to rally further here.

Technical Views

EURCAD

EURCAD is one of the bets vehicles currently for expressing long EUR views. With the BOC having tightened aggressively and now looking to slow down to a smaller pace of hikes while the ECB is stepping up the pace of its own monetary tightening, this creates narrowing gap in monetary policy divergence, favouring further upside in EURCAD.

Price has recently broken out above the bearish trend line from YTD highs and also the recent flatter bear channel. With price now above the 1.3348 level, the pair looks to have carved out a base, suggesting room for further upside near-term towards the 1.3766 level next.