Even though the Euro is hovering less than 1 Euro-cent away from its all time high, the currency is struggling to extend its gains.
ECB President Trichet continues to talk more about the Japanese Yen and Chinese Yuan than the Euro, which leads everyone to believe that he is still very comfortable with the way the currency is trading. The latest rise in oil prices will only exacerbate his concerns about inflation which is the primary reason why the central bank has been so hawkish. The question ahead of us however is whether inflationary pressures will offset a drop in analyst sentiment. Eurozone consumer prices for the month of September are due for release tomorrow along with the German ZEW survey. Analysts are typically far more pessimistic than businesses. In recent months, their degree of pessimism has not been useful in determining where the Euro is headed. Aside from the Eurozone data, Switzerland will also be releasing their retail sales report for the month of August. Consumer spending is expected to be firm, but that may help the Swiss Franc recover much of its losses since last week’s comments from SNB President Roth was pretty bearish for the Swissie.
Written By Kathy Lien, Chief Currency Strategist for dailyfx.com