The ECB has decided to raise interest rates again due to rising inflation.

The Euro has strengthened slightly after the market opened this past Monday. This is because the European Central Bank (ECB) is expected to increase interest rates, and there are also concerns that the Federal Reserve (FED) in the United States may raise interest rates again. These expectations are supported by the latest inflation data and the overall positive economic indicators in both regions. Therefore, there is room for further interest rate hikes.

The ECB raised interest rates once again on September 14th, marking the 10th consecutive rate hike, with a possibility of further hikes if inflation remains elevated. However, the ECB has indicated that it will keep interest rates at their current level until inflation falls back to the target range. Additionally, there has been a slight adjustment in the underlying inflation rate forecasts, with an average of 5.1% in 2026, 2.9% in 2027 and 2.2% in 2028.

The continuous rate hikes by the ECB have pushed mortgage rates to a 22-year high at 4.5%, and deposit interest rates have increased to 4%. As a result, people in the Eurozone are inclined to deposit their money in banks rather than investing in volatile assets, which may experience further price declines if inflation remains high and the ECB continues to raise interest rates.

Trade data for the Eurozone reveals a trade surplus exceeding 6.5 billion euros in July, with imports decreasing by 18.2% to 221.3 billion euros while exports decreased by 2.7% to 227.8 billion euros. The most significant drop in imports was in the energy sector, declining by 28.1%, followed by various industrial goods at 11.6%. The reduction in energy imports can be attributed to rising oil prices and the weakened currency. Importing goods in excess can lead to potential inflation issues in the future.

Wage growth in the Eurozone has slightly decreased by 4.6% YoY in the second quarter. It is evident that inflationary pressures persist, and real incomes continue to decline due to higher current inflation. Despite some economic activities showing resilience, there are still areas of concern. However, sectors like accommodation and food services continue to thrive, with significant demand for labor.

Techical analysis data (5H)

Resistance: 0.9363, 0.9372, 0.9378

Support: 0.9347, 0.9340, 0.9331

Source: Investing.com