EURUSD aiming to retake 1.1200 despite a further slowing in price pressures in six German states in September.

EURUSD rises to almost 1.1200 during Monday’s European trading session. The major currency pair increases despite the fact that six German states’ flash annual Consumer Price Index (CPI) data show that price pressures eased further in September. Month-on-month inflation jumped quicker than market participants expected in August, but remained within the 0.2% range.

On Friday, the Flash French Consumer Price Index (EU Norm) and the Spanish Harmonized Index of Consumer Prices (HICP) statistics both indicated that price pressures increased at a slower-than-expected rate in September.

Lagarde could hint at whether the ECB would lower interest rates again in October.

A further decline in inflationary pressures has spurred market predictions that the European Central Bank (ECB) will drop interest rates again at its October meeting. Investors increased their bets on another rate drop on October 17 and now estimate a 75% possibility of a move, up from approximately a 25% chance last week, according to Reuters. During its policy meeting on September 12, the ECB decreased its Rate on Deposit Facility by 25 basis points (bps) to 3.5%.

Going forward, the Euro (EUR) projected to remain highly volatile as investors wait for the preliminary HICP figures for Germany and the Eurozone for September will be release on Monday and Tuesday, respectively.

In today’s session, investors also pay special attention to ECB President Christine Lagarde’s address at 13:00 GMT, in which she expected to provide clues about the likely course of interest rate cuts for the rest of the year.

Daily market movers: EURUSD rises amid continued deceleration in inflation in six German states.

EURUSD edged higher on Monday, as the US Dollar (USD) remained under pressure ahead of Federal Reserve (Fed) Chair Jerome Powell’s address at 17:00 GMT. Investors expect Powell to deliver new clues about the Fed’s likely interest rate decrease magnitude at the November monetary policy meeting. According to the CME FedWatch tool, the chance of the Fed cutting interest rates by 50 basis points (bps) in the November meeting to 4.25%-4.50% is 41.6% at the time of writing. Following the release of the United States (US) Personal Consumption Expenditures Price Index (PCE) report for August, the chance fell from almost 53.0% on Friday.

The PCE price index report indicated on Friday that annual inflation fell at a quicker rate to 2.2%, compared to predictions of 2.3% and July’s reading of 2.5%. The reading was the lowest since February 2021. However, its impact looked to be countered by the annual core PCE inflation, which includes volatile food and energy costs, that advanced to 2.7% from the previous The predicted 2.6% release reduced the chances of a double-dose rate drop at the next meeting.

Fed Chairman Powell would provide guidance on the extent of the probable interest rate drop in November.

Fed policymakers have recently become more focused on averting job losses and an economic slowdown, with increasing confidence that inflation will return to the bank’s 2% target. To gain new insights into the present state of labor market health, investors will look to a slew of economic data, including JOLTS Job Openings for August and ADP Employment Change and Nonfarm Payrolls (NFP) data for September, which will be released this week.