The ECB wage growth tracker shows that negotiated wage growth, adjusted for one-time payments, is expected to be 4.6% in 2024 and 3.2% in 2025. For the first half of 2026, the tracker estimates a growth rate of just 1.7%. This represents a decline from 2.1% in the second half of 2025 and 4.3% in the first half of 2025. Steady wage growth helps the ECB keep inflation stable and close to their target when there are no economic shocks.

Cooling Wage Pressures In Eurozone

New data indicates that wage pressures in the Eurozone are easing. The latest tracker shows negotiated wage growth at 3.2% for all of 2025, dropping sharply to 1.7% in the first half of 2026. This is a significant drop from the 4.3% wage growth seen in the first half of this year. This data strengthens the case for the European Central Bank (ECB) to adopt a more lenient stance. With inflation figures from August 2025 already down to 2.3%, this wage information removes a major barrier to potential rate cuts. The aggressive rate hikes of 2023 and 2024 were largely due to concerns about a wage-price spiral, but this new data suggests those fears are diminishing. For traders, this signals that interest rates may stay lower for a longer time than the market currently anticipates. It might be wise to consider receiving fixed rates on Euro interest rate swaps, betting that market rates will decline further. Options that gain from falling bond yields, like buying calls on German Bund futures, now seem more appealing.

Impact On The Euro

The Euro’s outlook is also affected, as lower rate expectations generally weaken a currency compared to others, like the US dollar. Derivative strategies could include buying put options on the EUR/USD. This gives you the right to sell the Euro at a certain price if it drops, allowing you to profit from a potential decline while limiting initial risk. All attention is now on the upcoming ECB meeting on October 23rd for any shifts in their official stance. We expect that market expectations for rate cuts in the first quarter of 2026 will increase in the coming weeks. Any comments from ECB officials before then will be closely monitored for indications that they recognize these cooling wage pressures. Create your live VT Markets account and start trading now.

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