<\/p>\n
French and Spanish inflation figures surprised on the downside on Friday, coming in at 1.2% and 1.5% respectively. That is helping explain the euro\u2019s muted reaction to China\u2019s stock rally this morning, as markets are almost fully pricing in a 25bp European Central Bank rate cut in October,\u00a0due to both those lower inflation prints and\u00a0a\u00a0Reuters report\u00a0suggesting Governing Council doves are ramping up pressure to stay keep easing policy, ING\u2019s FX strategist Francesco Pesole notes.<\/p>\n
\u201cWhat appears clear from the latest off-meeting communication is that the hawk-dove\u00a0factions are at a recent high within the ECB. Ultimately, data should be the tie-breaker for an October cut, so expect this morning\u2019s German CPI and tomorrow\u2019s eurozone-wide figures to trigger some EUR moves.\u201d<\/p>\n
\u201cWe may also get some clues from today\u2019s speech from ECB President Christine Lagarde<\/a> at the EU Parliament. We\u00a0have a number of hawkish and dovish members speaking later this week, including Isabel Schnabel and Philip Lane. If we end the week with slower-than-expected eurozone inflation and somewhat weaker US payrolls figures endorsing a 50bp Fed<\/a> cut, then expect the euro to be one of the laggards in a weak USD environment as markets\u00a0cement bets that the ECB will continue cutting in October.\u201d<\/p>\n