Sharp fall in the euro

The EUR/USD exchange rate plunged yesterday after Christine Lagarde reaffirmed her belief that inflation would quickly fall below 2% and that an ECB rate hike was highly unlikely by 2022. From a technical point of view, the next support for the euro is at 1.1290 USD. It is possible that it will be reached before the end of the year as expectations of an early Fed rate hike are expected to strengthen. Yesterday’s New York Fed survey confirmed that business costs are tightening but that companies are in a position to increase their selling prices, given robust demand. The US 10-year bond yield continued to rise (1.61%). The spread with the German Bund is at its highest since April.

The euro also fell against the pound (EUR/GBP @0.8450) as strong UK job creation in September boosted expectations of a BoE rate hike next month.

The economic agenda is busy today. After the second estimate of the Eurozone’s Q3 GDP (+2.2% qoq), a salvo of US indicators will be released and not the least: retail sales, industrial production and foreign trade prices in October, as well as the NAHB housing market index for November.