Despite the volatility in the rest of the foreign exchange market, the Euro traded in a tight range. Slower manufacturing sector growth in Germany and France did not stop the final Eurozone PMI numbers from coming out stronger than expected. This however should have little impact on the ECB?s interest rate decision tomorrow.
They are expected to leave rates unchanged at 4.00 percent. There is a slim chance that the central bank could hold a surprise press conference but given the volatility in the global equity markets, we think that this is extremely unlikely. However if they do, this means that inflation is such a big concern that they cannot afford to relax. It would also signal that they fully plan on raising interest rates when they return from their holidays in September. Alternatively, if they do not hold a press conference, then that could mean another rate hike will not come until October.