17.10.201710:56 Forex Analysis & Reviews: The absence of rising inflation in the euro area will push the euro downwards

Today, the entire attention of the markets will focus on the data output of the eurozone's consumer inflation. This is a very important data that will fully influence the ECB's decision whether to continue buying government bonds in the current monthly volume of $60 billion or not.

In accordance with the given forecast, the annual growth of consumer price index should remain at the level of 1.5%. The base value of this indicator should also show an increase of 1.1%. At the beginning of this year, it should be noted that subsequent to the sharp increase in consumer inflation to 2.0% in the ECB, there was an opinion about the need to change the existing monetary policy. At the end of spring for the first time, President Mario Draghi made it clear that the bank could proceed on measures in the reduction of volumes when buying government bonds, or to complete the freezing incentive measures. The emerging strong economic data also supported these ideas.

As a result of these events, the single European currency gained further growth momentum after an increase against the backdrop of French election results. But at the end of summer, it became clearer that the inflation growth had stalled and the sharp appreciation of the euro began to have a negative impact on economic growth, then reactions from the ECB members about the possible delay in the change of money rate started to rise. This had a strong negative impact on the euro. At the same time, the slightly unequivocal victory of Angela Merkel in the elections to the Bundestag coupled with the Catalan crisis and the passage of right-wing parties in the Austrian parliament, has began to negatively influence the investor's mood, arousing their doubts that the ECB would dare with a set of negative radical change in the course of monetary policy.

In assessing this state of affairs, it is assumed that if the inflation data for today will not show a shift towards growth, then the ECB would unlikely take any radical decision next week regarding the changes on monetary policy. Moreover, it can only strengthen the fall of the single European currency.

Forecast of the day:

The EUR/USD pair is trading lower and the publication of consumer inflation data in the euro area is anticipated. If the data will not show the continuity of inflationary pressures, the pair will keep falling in anticipation that the ECB meeting scheduled next week will not lead to a radical change in the bank's monetary rate. The pair may fall on this wave to 1.1700.