EUR: Domestic picture remains grim

EUR/USD has been stabilising in the 0.98-0.99 area after the rally from 0.9700, likely
reflecting some positioning adjustments more than any change in the key drivers.
Dollar strength remains the main hindrance to recovery in the pair, but the
domestic picture is still far from looking appealing to investors. Despite a smallerthan-
expected slump in the ZEW expectations index, the current situation survey
plunged dramatically to -72.2 in October. These are levels last seen only in 2020
and 2009.
The easing in gas prices is likely preventing a return to the 0.9540 lows, but we think
the next round of dollar appreciation will heavily test that support.
Today, the eurozone calendar includes the final CPI reading for September, as well
as speeches by the ECB’s Francois Villeroy, Mario Centeno and Ignazio Visco.

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