Inflation in the Eurozone reached a new high in August, and analysts anticipate that it will continue to climb in the months ahead. According to statistics provided by Eurostat, the acceleration of price increases for food, alcohol, and tobacco contributed to the jump in August’s overall inflation rate. Year-over-year price increases for these categories reached 10.6% in August, compared to a rise of 9.8% in July.

As a result of the ongoing spike in the cost of natural gas, it is anticipated that inflation will rise even more in the coming months across the Eurozone, with the possibility of reaching double digits. As a result of soaring energy costs even before the beginning of the heating season and the reversal of certain German subsidies, it is likely that inflation will continue to grow and reach over 10% before reaching its highest point during the holiday season.

Since the speech that US Federal Reserve Chair Jerome Powell gave at the hawkish Jackson Hole Symposium last week on Friday, we have witnessed a noteworthy change in language from several Members of the European Central Bank (ECB). Joachim Nagel, a member of the Council who also serves as the president of the Bundesbank of Germany, said that “We shouldn’t postpone the next interest-rate adjustments for fear of a future recession.” This comes as a result of yesterday’s inflation data in Germany, which came in at a level that was somewhat higher than anticipated.

In contrast to the estimate of 8.8%, the year-over-year increase in consumer prices for July was 8.8%.

The data released today will only serve to boost arguments for a big interest rate rise at the meeting of the European Central Bank that will take place the following week. With markets pricing very solidly on the hawkish side, presently a 70bp increase is priced in for September and a 160bp increase by the end of the year, the meeting of the central bank the following week is quite important.

CHART EUR/USD 1 HOUR

The first response on the market was quite muted, with the EURUSD only moving up by 15 points. We are trading today below the 20, 50, and 100-SMA, and it seems that we are rangebound between the level of 0.99000 and the level of 1.00630. To continue with further positive price action on a longer timeframe, a daily candle closure that is above the level of 1.00161 is required. If we are able to sustain a close above this level, we may go higher into the next region of interest located around 1.01500.

Caution is the word of the day as the pair may have difficulty breaking above 1.0100 and faces downside risks as the conclusion of the anticipated shutdown of Nord Stream over the weekend draws near.

Important intraday levels to keep an eye on are as follows:

Areas of Support

• 0.99600

• 0.99000

Areas of Resistance

• 1.00161

• 1.01500