The European Central Bank (ECB) sees inflation pressures as transitory and have indicated that the next “live” meeting is in December. Rising inflationary data may pressure EUR/USD to breach 1.15, economists at Westpac report.

Supply costs and labour constraints are hampering activity

“Core members of ECB have recently underscored their desire to avoid any premature withdrawal of accommodation and have also stressed that current upside inflationary pressures are mostly transitory. By stressing this, they have effectively pushed back on any potential for early ‘recalibration’ of either the PEPP (due to end in late Q1) and APP at least until the staff projections are updated in December.” 

“A distinct waning in survey data of late while inflation reads have remained high has highlighted that supply costs and labour constraints are hampering activity. This should increase attention on flash Oct PMIs.”

“The cautious stance of ECB puts it at the dovish end of the shifts in global CBs towards tapering or hiking and is likely to cap any EUR/USD rebounds and sustain pressure on 1.15 support.”