Through the European trading hours Wednesday, the euro was enjoying a modest but consistent decline against its US counterpart owing largely to the comments delivered by Axel Weber. The policy member’s suggestion that forecasts for a near-term rate cut clearly took the wind out of the speculation developing behind the dovish ECB argument.

However, his comments didn’t go too far in terms of putting the market off its consensus for the eventual turn in rate bias. Looking at overnight index swaps, the market was still pricing in 33 basis points of easing (an assured quarter point hike and debate about a second) over the coming 12 months – only a few points off yesterday’s reading. This modest impact in rate expectations (and indeed the euro itself) shouldn’t be too surprising as it was clear that forecasts for rate cuts were already very modest and few fundamental traders were looking for any action in the near term. For those that thought Weber’s comments were the only (or even the most important) fundamental driver for the day, they clearly missed out on a far more interesting release – the preliminary readings on German consumer inflation. The headline CPI figure cooled more quickly than expected from a 14-year high 3.3 percent to 3.1 percent through August. While this shift was largely due to the 20 percent-plus tumble in crude, it still has a more tangible influence over the rate outlook.