Eurozone: Inflation falls below ECB’s 2% target for first time since 2021 – UOB Group

FXStreet Insights Team FXStreet

Preliminary figures showed that inflation in the Eurozone eased further to 1.8% in September, from 2.2% in August, as energy prices continued to decline. This marks the first time in three years that headline inflation has fallen below the European Central Bank's (ECB) 2%-3% target, UOB Group economist Lee Sue Ann notes.

Energy prices continue to decline

“Eurozone inflation fell to 1.8% in September, from 2.2% in August, coming in below the ECB’s 2% target, according to preliminary data. Core inflation, which excludes more volatile energy, food, alcohol and tobacco prices, came in at 2.7%.”

“While we are cognizant that the risk of a rate cut in October certainly seems more likely than before, we maintain our view of the ECB cutting again only when policymakers convene in December for the final time this year.”

“We think that the widely watched services inflation, which eased slightly only to 4.0% in September, from 4.1% in August, is still high for the ECB. Furthermore, inflation dynamics are quite different across Eurozone countries.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD weakens below 1.3250 on UK political risks, BoE repricing

The GBP/USD pair trades in negative territory around 1.3245 during the early Asian trading hours on Wednesday. Traders await the UK political developments, focusing on potential leadership by Andy Burnham and adherence to existing fiscal rules. Bank of England Governor Andrew Bailey is set to speak later in the day. On Thursday, all eyes will be on the US jobs data for June.

EUR/USD declines to near 1.1400 as softer German inflation undercuts ECB hike bets

The EUR/USD pair loses momentum to near 1.1410 during the early Asian trading hours on Wednesday, pressured by receding bets for aggressive tightening by the European Central Bank (ECB). Traders will take more cues from the preliminary reading of the Harmonized Index of Consumer Prices from the Eurozone and US Manufacturing Purchasing Managers Index report, which are due later in the day.

Gold falls back below $4,000 amid a bullish USD

Gold drops back below $4,000 following the previous day's two-way price swings as the US Dollar stands firm amid safe-haven demand, bolstered by uncertainty surrounding US-Iran talks. Meanwhile, Tuesday's strong labor market data reaffirmed bets for a Fed rate hike in 2026, adding to the Greenback's strength at the expense of the bullion.

The quarter ended bright green, but the market changed horses several times

Lower oil may support demand more than it lowers inflation, which keeps the Fed, front-end yields and the $ firmly in the driver’s seat. The S&P 500 has just delivered its best quarter in six years, the Nasdaq has found its stride again, and semiconductors have posted their strongest quarter on record.

Why a hawkish Bank of Japan could trigger the next Bitcoin sell-off

The Japanese Yen hits a 40-year low of 162.00 against the US Dollar, raising concerns about intervention or additional rate hikes by the Bank of Japan. BoJ may sell US Treasuries to buy back Yen, potentially pushing US bond yields higher and making Bitcoin less attractive to investors.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.