Preliminary inflation data from the eurozone with low market potential

The first HICP inflation estimate for August in the eurozone is unlikely to provide a significant stimulus for markets. Since March, price growth has been stabilizing around 2%, with only minor fluctuations, and the lack of new sources of inflationary pressure is consistent with the ECB's moderate, non-interventionist stance. In this context, President Christine Lagarde's recent statement on the practical achievement of the goal only reinforces the belief that the room for revision of the interest rate path remains limited.The euro's historically lower volatility than the dollar further suggests less sensitivity to even moderate inflation surprises.

The technical approach of the publication also favors a calm reaction. The vast majority of HICP components are disclosed in advance by national statistical offices, which means that the market already has a representative sample of data before the aggregate indicator is announced.Following the latest reading from the Netherlands, approximately 85% of the index weights are available, and the current composite readings imply a month-on-month gain of close to 0,1% for the entire zone, consistent with the Bloomberg consensus. In practice, this narrows the range of possible deviations and limits the potential for surprises.

Eurodollar within the ascending channel

From the perspective of implied rates and the foreign exchange market, the baseline scenario remains that expectations for relatively stable ECB monetary policy will remain. A change in the narrative could only be brought about by significantly higher services inflation or a clear rebound in core measures, signaling a renewed buildup of demand pressure. On the dovish side, a lower reading of broad-based core inflation would confirm a soft landing path and keep the central bank in wait-and-see mode.In the short term, wage data, the employment components of the services survey, and the trajectory of core inflation will remain more important for valuations than today's flash.

EUR / USD exchange rate It remains below the descending line drawn through local highs. The chart also shows a triangle formation from which the price remains unable to break out. The base case scenario is a continuation of the uptrend, with the price still within the ascending channel. Key medium-term resistance is the 1,1820 level – the high from early July.

Source: OANDA TMS Brokers