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The Fed Chief sparked across the board selling of the USD when he left the door open for another round of quantitative easing, but it will be difficult for some FOMC members to support QE3 should US inflation continue to rise as was apparent in last month\u2019s CPI data.<\/p>\n
<\/span>Today\u2019s Key Economic Events:<\/p>\n EUR \u2013 CPI y\/y \u2013 09:00 GMT USD \u2013 Unemployment Claims \u2013 12:30 GMT USD \u2013 PPI m\/m \u2013 12:30 GMT
\nExpectations: 2.7%. Previous: 2.7%.
\nEU inflationary pressures have been on the rise, thus the ECB has raised interest rates<\/a> twice this year and another 25 bps of tightening is expected when Italy\u2019s Mario Draghi takes over the helm of the ECB to solidify his inflation fighting credentials, much in the way his predecessor Jean-Claude Trichet has done. A rise in EU headline inflation would likely boost the euro from its recent lows in the crosses as traders price in another interest rate increase. EUR\/GBP resistance is found at the broken trend line beneath the May and June lows at 0.8870. <\/p>\n
\nExpectations: 413K. Previous: 418K.
\nLast week\u2019s dreadful NFP jobs report<\/a> underlines the position of the Fed and Bernanke, \u201cuntil we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.\u201d Therefore an additional drag on employment may bring further inflows to the safe-haven Japanese yen. The USD\/JPY has recently moved below its trading range and could continue to fall towards its all-time low at 76.11.<\/p>\n
\nExpectations: -0.2%. Previous: 0.2%.
\nThe Fed\u2019s strategy with QE2 was to avoid a deflationary environment by creating a burst of inflation. Yesterday Bernanke left the door open for another round of quantitative easing which led to dollar selling across the board. However, given the CPI data from May that showed US CPI rising 3.6% y\/y<\/a> and core CPI climbing to 1.5%, it may be a tough sell to other FOMC members to enact another round of quantitative easing for fear of the Fed losing its grip on inflation and its reputation. EUR\/USD support comes in at 1.4160 from the rising trend line on the hourly chart. Resistance is found at the 100-day moving average at 1.4280. <\/p>\n