Eurostat has released data showing that the Eurozone’s preliminary Consumer Price Index (CPI) for August increased by 2.1% compared to last year. This is slightly higher than the expected 2.0%. The previous CPI was recorded at 2.0%. The Core CPI, which doesn’t include items like food and energy, rose by 2.3%, matching forecasts, but down from 2.4% before. Services inflation is at a steady 3.1%. These numbers are important for the European Central Bank’s (ECB) upcoming policy meeting.

ECB Meeting Predictions

With overall inflation rising to 2.1% and core inflation easing to 2.3%, the ECB has little reason to change its current policy. We expect the ECB to keep interest rates steady at its meeting next week. This could lead to a period of lower volatility in short-term interest rates. Traders should think about strategies that benefit from this anticipated stability, like selling volatility on near-term interest rate futures. Current market pricing in €STR futures shows a low chance of a rate change before the end of 2025, reinforcing this view. Since July 2025, implied volatility on three-month EURIBOR options has dropped by nearly 15%. For equity derivative traders, a steady ECB suggests that markets for indices like the Euro Stoxx 50 will remain within a range. Without a major catalyst for a breakout, using strategies like iron condors to sell premium could work well. The VSTOXX index, which measures Euro Stoxx 50 volatility, has fallen to 14.5, indicating this low-conviction environment.

Services Inflation Watch

The biggest risk to this outlook is the persistent services inflation, which is still high at 3.1%. Considering the stubborn inflation trends from 2023-2024, ongoing services inflation could lead the central bank to delay easing its policy longer than the market expects. This is a key area to monitor for signs of a rebound. Given this persistent services inflation, betting on aggressive rate cuts in early 2026 may be too soon. A cautious strategy would be to use calendar spreads in rate futures, capturing the expected lack of movement in the coming weeks while remaining open to potential policy changes later on. Create your live VT Markets account and start trading now.

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