The Euro strengthened, trading above $1.17, buoyed by accelerating Eurozone inflation data for September. The US dollar weakened due to disappointing ADP employment numbers and a US government shutdown. Expectations that the ECB will refrain from cutting rates were reinforced by the inflation data and recent comments from ECB officials.
- Euro traded above $1.17.
- Eurozone inflation rose to 2.2% in September, up from 2.0% in August.
- The inflation figure is slightly above the ECB’s mid-point target.
- ECB Vice President Luis de Guindos stated that “the current level of interest rates is adequate.”
- ECB board member Gabriel Makhlouf suggested that “we are near the bottom of the easing cycle.”
- The ECB is expected to hold rates unchanged at its October 30 meeting.
The Euro’s positive reaction to the inflation data signals growing confidence in the Eurozone economy. The data, combined with hawkish comments from ECB officials, supports the expectation that the ECB will maintain current interest rates, making the Euro a potentially more attractive currency compared to the US dollar, which is facing headwinds from domestic economic data and political uncertainty. This could lead to further Euro appreciation in the short term.