Euro slips as Eurozone inflation falls to 4.3%

• Eurozone CPI confirmed at 4.3%
• Markets eye Fedspeak, with four FOMC members speaking today

The euro is considerably lower on Wednesday. In the European session, EUR/USD is trading at 1.0525, down 0.48%.

Eurozone inflation falls to 4.3%

The inflation rate in the eurozone for September was confirmed at 4.3% y/y on Wednesday, down from 5.2% in August and the lowest since October 2021. Services, food and energy prices were all lower. Core inflation, which excludes food and energy prices, was confirmed at 4.5% y/y in September, down from 5.3% in August and its lowest level since August 2022.

The positive news follows last week’s German inflation release for September, which showed headline CPI falling from 6.1% y/y to 4.5% and the core rate easing to 4.6%, down from 5.5%. Inflation remains well above the ECB’s target of 2%, but the central bank’s tightening is clearly showing results, as elevated rate levels continue to filter through the economy.

In the US, four FOMC members will be speaking today. Their comments will no doubt provide some headlines and perhaps some insights into future rate policy. This will be followed on Thursday with remarks from Federal Reserve Chair Powell at an event in New York.

The Fed has consistently preached a ‘higher for longer’ stance on rates and Tuesday’s hotter-than-expected retail sales report supports this stance, as does the September inflation report. Consumer inflation remained unchanged at 3.7%, higher than the market estimate of 3.6%. The future markets have reacted by raising the probability of a quarter-point hike in December – just one week ago, the odds stood at 26% but have jumped to 41% at present, according to the CME FedWatch Tool.

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EUR/USD Technical

• EUR/USD is testing support at 1.0548. Below, there is support at 1.0456
• 1.0600 and 1.0648 are the next resistance lines

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