Takeaway

The presenter argues that the Euro is weakening despite Eurozone inflation hitting a two-year high. This is because significant concerns over economic growth, highlighted by a sharp decline in German retail sales, are currently outweighing the pressure on the ECB to hike rates. The speaker believes the upcoming US jobs report is the next major catalyst, with a strong number likely to reinforce Fed hawkishness and push the Euro lower.

What the presenter said

• The Euro is under pressure, trading below 1.16 against the US Dollar, even as Eurozone inflation reached its highest level in almost two years. [00:11]
• Eurozone inflation hit 3.3% year-on-year in August, driven by energy prices and sitting well above the ECB's 2% target. [00:34, 00:43]
• Despite rising expectations for ECB rate hikes, the Euro is falling due to concerns about weaker Eurozone economic growth. [01:19]
• German retail sales fell by 3.4% in July, the steepest decline in four years, raising alarms about consumer strength. [01:35]
• The presenter's view is that the Euro is caught between inflationary pressures and growth fears, with growth concerns currently winning out. [01:55]
• A hawkish tone from the Federal Reserve and rising US Treasury yields are strengthening the US Dollar, with markets now pricing a 65% chance of a September Fed hike. [02:40, 02:51]
• The key near-term event is Friday's US jobs report, which could give the dollar another leg higher if it comes in stronger than expected. [03:08, 03:28]

Trade ideas

None stated. The presenter's market view is that growth concerns are outweighing inflationary pressures for the Euro, with downside risk to EUR/USD particularly if the US jobs report is strong.

Levels and data cited

Price Levels: * EUR/USD: Currently trading below 1.16. Key resistance at 1.1650, followed by 1.17 and 1.18. Support is noted at the 200 EMA (around 1.1565) and 50 EMA (around 1.1550), with a break targeting 1.15. * Brent Crude: Trading above $90/barrel.

Data Cited: * Eurozone Inflation (Aug): 3.3% YoY * German Retail Sales (Jul): -3.4% MoM * Fed Rate Hike Probability (Sep): 65% * US Job Losses (Jul): 23,000

Risks and what would invalidate this

• Weaker Eurozone economic growth could make it difficult for the ECB to execute aggressive rate hikes.
• Escalating tensions in the Middle East could continue to drive energy prices higher, complicating the inflation picture.
• A stronger-than-expected US jobs report could reinforce Fed hawkishness and further strengthen the US Dollar against the Euro.