Shinobi - EURUSD: Concerns about bad data for EURUSD

The late release of European data is at least worrisome as last week's PMI data actually stoked fears of a recession as rate hikes start to take their toll on the economy. PMI data shows a slowdown in many areas while input costs show signs of accelerating. The increase in price pressure leaves the Euro Area vulnerable to further rate hikes, which will inevitably tip the region into recession. These price pressure concerns have been echoed by both ECB President Christine Lagarde at her Jackson Hole address as well as ECB policymaker Martin Kazaks, who has stated that a pause now may have longer lasting impact. When things settle down, the September meeting is delicately ready with the probability of another 25 basis points up around 50/50.

From a risk event perspective there isn’t a lot on the horizon for the Euro Area, US and the UK this week and each release could have a knock-on effect on EURUSD and EURGBP. The Euro Area will release its latest inflation flash estimates this week which could be a key guide to the European Central Banks (ECB) decision at the September meeting. Any sign that inflation may be making a move higher again or signs that the gradual decline may be losing steam could solidify the ECB decision of one more rate hike now rather than wait any longer. This in theory should provide the Euro with some strength which may come under pressure depending on the data releases of its counterparts.