The latest Eurostat data shows that the Eurozone’s Consumer Price Index (CPI) for August 2025 is at 2.0% year-on-year. This is a slight adjustment from an earlier estimate of 2.1% and matches last month’s rate. The core CPI, which excludes food and energy prices, remains steady at 2.3% year-on-year. However, this marks a small drop from the previous month’s 2.4%.

The ECB Stance

With inflation at the 2.0% target, the European Central Bank (ECB) has little reason to act aggressively. Still, the persistent core inflation of 2.3% will make them cautious about lowering interest rates too quickly. This mixed signal suggests that the ECB will likely maintain its current stance in the upcoming meeting. This expected inaction from the central bank should keep short-term interest rate expectations stable in the coming weeks. Following the rate cuts in 2024, the ECB has signaled a pause, and this data supports maintaining the deposit rate at 3.50%. We see little benefit in betting on major rate changes, so Euribor futures should reflect this stability. Predictability from the central bank usually lowers market volatility, a trend we’ve noticed since the inflation crisis of 2022-2023. With the VSTOXX index already lower than last year, selling options on indices like the Euro Stoxx 50 to collect premium seems like a wise strategy. There aren’t clear signs of a major shock in the market.

Currency Implications

For the euro, this data doesn’t provide much guidance, indicating that the currency will likely stay within a narrow range against the dollar. The slight downgrade in the headline number may seem softening, but strong core inflation helps keep the EUR/USD pair stable. Using options strategies like iron condors to bet on the euro staying within its recent range of 1.07-1.09 could be a good idea. We also need to look at the overall economic situation, which includes weak GDP growth in the first half of 2025. This sluggish growth limits the ECB’s ability to raise rates to address core inflation issues. This reinforces our belief that the most likely scenario is a prolonged pause, making low-volatility strategies the best option. Create your live VT Markets account and start trading now.

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