The European Central Bank is expected to keep policy steady when it announces its decision at 13:15 GMT, leaving the Main Refinancing Operations rate at 2.65% and the Deposit Facility at 2.50% after 25 bps increases in September and June. Markets are positioned for a pause, but attention will turn to the 13:45 GMT press conference for guidance on whether policymakers are preparing a third move in December; futures imply better than 80% odds of a quarter-point rise. Inflation data keep the tightening bias alive: Eurozone CPI rose to 3.8% year-on-year in September from 3.2% in August, with energy prices up nearly 19%, while oil is around 50% above July lows.
Sovereign Stress And The Euro
Financial conditions are also being shaped by sovereign stress, with France’s higher borrowing costs widening its spread versus the German Bund to levels last seen in the 2009–2011 crisis, prompting talk of the Transmission Protection Instrument, though activation this week is seen as unlikely.
Foreign Exchange Market Reaction
In FX markets, the euro has weakened as oil trades above $100 and France remains in focus: EUR/USD is down nearly 5% in two months to 17-month lows just above 1.1100; EUR/GBP has fallen about 2.8% and EUR/JPY about 6%. Technical markers show RSI below 40, MACD histogram above zero, with resistance at 1.1255 and levels at 1.1113, 1.1095 and 1.1050 in view.
