he preliminary set of October’s German CPI figures headlines the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to tick higher to 0.8 percent, the highest in two years.

Markets seem to have taken to the idea that the ECB is angling to taper QE asset purchases after the existing effort runs its course in March 2017. This is despite vocal protestations from policymakers and the glacial pace of improvement on region-wide price growth.

Accelerating inflation in the region’s largest economy may lend near-term credence to this (highly improbable) scenario, offering a degree of temporary support to the Euro. Any gains are likely to be short-lived however.

The third-quarter US GDP report enters the spotlight later in the day. The economy is expected to have grown at an annualized pace of 2.6 percent, the fastest since the second quarter of last year. A strong print may fuel Fed rate hike speculation, pushing the US Dollar broadly higher.

Worryingly, US economic news-flow has increasingly underperformed relative to baseline forecasts in recent months, opening the door for a downside surprise. The possibility of such an outcome is reinforced by ominous leading indications from Markit PMI surveys and the Atlanta Fed’s GDPNow model.

A disappointment will not necessarily scatter rate hike bets. Indeed, the Fed has managed to talk up the priced-in probability of December tightening to nearly 73 percent despite lackluster news-flow. Still, the greenback may take a leg lower if GDP data disappoints in a material way.

What do past price patterns hint about on-coming FX trends? Find out here.

Asia Session