Euro Core Inflation Beats Estimates, EUR/USD Pushes Higher

Eurozone CPI Talking Points:

Eurozone Core CPI for August beats estimates at 1.6%
Energy Sector shows the largest increase since July
EUR/USD edges above 1.180

Eurozone Core Inflation Rate (YoY) came in at 1.6%, beating estimates of 1.5% as inflationary pressures continue to mount.

With policy makers maintaining a dovish stance, the European Central Bank (ECB) has suggested that higher inflation is ‘transitory’ and will likely subside once global economies have returned to Pre-Covid activities.

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As the European Central Bank (ECB) prepares for their next meeting, expected to be held on 9 September 2021, investors are pricing in an extension of Quantitative Easing despite a positive German employment report.

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While the Energy sector showed the highest annual rate increase from 14.3% in July to 15.4% in August, supply constraints in the oil and gas industry combined with the spread of the Delta variant have dampened sentiment, raising concerns that the increasing pace at which global economies are recovering from the pandemic may have additional long-term consequences if low interest rates remain for the foreseeable future.

Source: ECB Eurostats

The release of the data combined with a better than expected unemployment data from Germany, Europe’s largest economy, EUR/USD edged higher, above the key psychological level of 1.180 which continues to hold as support for the imminent move.