EURO May get Help by Aggressive ECB

The European Central Bank may prove even more aggressive on interest rates than expected next Thursday, making it more likely that the euro will finally breach $1.30.

Expectations that the ECB will hike rates more than initially anticipated are growing, despite data later Friday that may show inflation in the euro zone is falling back under the ECB's own target of 2%.

Just because inflation is lower than the target does not imply that the ECB will stall

On the contrary, this could encourage the central bank to accelerate its rate hikes - raising them by 50 basis points rather than just 25 basis points at its policy meeting next Thursday.

We actually wonder whether the ECB might hike 50 basis points just to get through the rate hikes before inflation falls too far and the economy slips next year.

Axel Weber, the Bundesbank President, was similarly hawkish earlier in the week, arguing that the recent fall in oil prices isn't necessarily going to translate into a sustainable fall in inflation, given the risk of second-round effects from wage increases.

This very much suggests that the ECB is still on for a rate hike next week and that the market will continue to look for a follow up move in December
Rhetoric from Weber stressing the need for continued vigilance and playing down the impact of the recent oil (price) decline has reinforced the perception of further monetary tightening

Important Europe Zone Economic Datas Coming out today

9:00 GMT

Business Climate Indicator - Expected: 1.20

Industrial Confidence - Expected: 1

Consumer Confidence - Expected: -8

Economic Confidence - Expected: 106.3

Services Confidence - Expected: 19