A survey by the European Central Bank (ECB) indicates that consumer inflation expectations in the eurozone continued to decline in September, which may give policymakers more confidence that they might reach their inflation targets earlier than previously anticipated. The ECB's monthly survey reveals that eurozone consumers expect an inflation rate of 2.4% in the next 12 months, the lowest level since September 2021, down from 2.7% in the August survey. Additionally, consumers anticipate an inflation rate of 2.1% over the next three years, lower than the 2.3% expected in the August survey. The survey also shows that consumers hold a pessimistic view of the eurozone economy, expecting a contraction of 0.9% in the next 12 months, consistent with the results from the August survey. The survey indicates that consumer expectations for unemployment rates over the next 12 months have risen from 10.4% to 10.6%. Since inflation expectations play a key role in driving inflation back down, this result supports those ECB officials who advocate for faster interest rate cuts.

Furthermore, business prospects in Germany improved in October, providing further evidence that the country's economic downturn may be coming to an end. Germany's IFO Business Climate Index for October rose from 85.4 in the previous month to 86.5, higher than the expected 85.6. Secondly, Germany's IFO Business Expectations Index for October increased from 86.4 in September to 87.3, the highest level since June and better than economists' forecasts. The indicator measuring current conditions also improved. Germany's IFO Current Assessment Index for October rose from 84.4 in the previous month to 85.7, also higher than expected. Ifo President Clemens Fuest stated in a statement last Friday: "Expectations are brighter, but there is skepticism. The German economy has temporarily stopped sliding." As the largest economy in the eurozone, Germany's economic downturn has sounded an alarm for the ECB. Money markets predict that the ECB's monetary policy will provide more support for the economy.

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Data to watch today includes the UK's CBI Retail Sales Diffusion Index for October and the US Dallas Fed Manufacturing Activity Index for October.

US Dollar Index

Last Friday, the US Dollar Index fluctuated higher, with a slight daily gain, currently trading near 104.40. In addition to the technical buying formed near the 104.00 level providing some support for the exchange rate, the cooling expectations of the Federal Reserve continuing to cut interest rates significantly also continued to support the exchange rate. Moreover, the overall good performance of the US economic data announced during the session also provided some support for the exchange rate. Today, attention is focused on the pressure near 104.80, with support near 104.00.

Euro/US Dollar

Last Friday, the euro fluctuated lower, with a slight daily loss, currently trading near 1.0790. In addition to the recent dovish remarks by ECB officials that have put some pressure on the euro, the rebound of the US Dollar Index, supported by good economic data and other favorable factors, is also an important factor in pressuring the euro to fall. Moreover, the weak CPI data announced in the eurozone during the session also put some pressure on the exchange rate. Today, attention is focused on the pressure near 1.0900, with support near 1.0700.

Pound/US Dollar

Last Friday, the pound fluctuated lower, with a slight daily loss, currently trading near 1.2950. In addition to the technical selling formed near the 1.3000 level putting some pressure on the exchange rate, the rebound of the US Dollar Index, supported by good economic data, is also an important factor in pressuring the pound to fall. Moreover, expectations of interest rate cuts by the Bank of England also put some pressure on the exchange rate. Today, attention is focused on the pressure near 1.3050, with support near 1.2850.