Eurozone inflation ticked higher in September, in line with forecasts, reinforcing the European Central Bank’s (ECB) cautious approach to rate cuts. Data released by Eurostat on Wednesday showed that the Harmonized Index of Consumer Prices (HICP) rose 2.2% year-over-year (YoY) in September, up from 2.0% in August, meeting market expectations.
The core HICP, which excludes volatile items like energy and food, held steady at 2.3% YoY, also matching forecasts. On a monthly basis, both headline and core inflation rose by 0.1%, down from 0.3% core inflation in August.
Breakdown of Inflation Components (via Eurostat)
- Services: +3.2% YoY (up from 3.1% in August)
- Food, alcohol & tobacco: +3.0% (down from 3.2%)
- Non-energy industrial goods: +0.8% (unchanged)
- Energy: -0.4% (up from -2.0%)
Market Reaction: EUR/USD Steady on Inflation Print
The Euro held modest gains following the inflation data. The EUR/USD pair rose 0.15% on the day, trading around 1.1750 at the time of the report.
The inflation figures remain above the ECB’s 2.0% target, keeping pressure on policymakers to maintain a cautious stance on rate adjustments. However, as both headline and core inflation came in line with expectations, markets showed limited immediate reaction.
The report follows Tuesday’s stronger-than-expected German HICP data, which showed inflation rising to 2.4% YoY in September, from 2.1% previously.
Euro Performance vs. Major Currencies
The Euro gained broadly but showed the strongest performance against the US Dollar, buoyed by Dollar weakness following soft US data and concerns surrounding the ongoing government shutdown.
| Base\Quote | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | — | -0.15% | -0.19% | -0.53% | 0.00% | -0.03% | -0.39% | -0.13% |
| EUR | +0.15% | — | -0.03% | -0.40% | +0.14% | +0.13% | -0.22% | +0.00% |
Outlook for EUR/USD: Bullish Momentum Builds
The EUR/USD pair extended its winning streak for the fourth consecutive session, supported by improving Eurozone inflation data and a weaker US Dollar. The pair currently trades near 1.1780, with bullish technical signals emerging:
- 14-day RSI has climbed above the 50 mark, suggesting positive momentum.
- Immediate resistance lies at 1.1918 — the September 17 high and the highest since June 2021.
- Support is seen at the 9-day EMA (1.1743) and the 50-day EMA (1.1688).
- A drop below 1.1608 (two-month low) could signal a reversal.
What’s Next for Traders?
Traders will watch closely for the US ADP Employment Change and ISM Manufacturing PMI later today. However, their release remains uncertain due to the US government shutdown, which is already affecting economic data flow and fueling expectations of a Federal Reserve rate cut.
The combination of steady Eurozone inflation and increased US monetary policy uncertainty could continue to support the Euro in the short term.
📘 Inflation FAQs (Quick Guide)
- What is HICP?
The Harmonized Index of Consumer Prices measures inflation across EU countries using a consistent methodology. It’s the ECB’s preferred inflation gauge. - What is core inflation?
Core inflation excludes volatile items such as energy and food. It offers a clearer view of underlying price pressures and is closely watched by central banks. - Why does inflation impact forex?
Higher inflation often leads to higher interest rates, making a currency more attractive. In contrast, falling inflation usually weakens a currency as rate cuts become more likely.