Global FX Market Summary: ECB Held Interest Rates Steady, US Inflation Was in Line with Expectations, US Dollar Weakened 12 September 2025

ECB holds rates steady amid eurozone optimism; US inflation steady, jobless claims rise; Fed rate cut bets fragileen US dollar, boosting EUR/USD.

1. The European Central Bank (ECB) Held Interest Rates Steady

The European Central Bank (ECB) left its key interest rates unchanged, a move that was widely anticipated by the market. This decision was supported by new economic projections that showed a more optimistic outlook for the eurozone. The ECB now expects headline inflation to average 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027. Similarly, core inflation is projected to average 2.4% in 2025, 1.9% in 2026, and 1.8% in 2027.

In terms of economic growth, the ECB revised its projection for 2025 upward to 1.2%, from the previous 0.9% estimate. While the 2026 growth forecast was slightly lowered to 1.0%, the 2027 projection remained stable at 1.3%. During the post-meeting press conference, ECB President Christine Lagarde stated that the bank is not on a “predetermined path” for interest rates, suggesting a data-dependent approach. This stance, which is viewn as less dovish than the Fed’s, created a monetary policy divergence that provided support for the euro.

2. US Inflation Was in Line with Expectations, but Jobless Claims Soared

The US economy delivered a mixed bag of data that shifted market sentiment. The Consumer Price Index (CPI) report for August showed that annual inflation rose to 2.9%, a modest increase from 2.7% in July and largely in line with market expectations. On a monthly basis, the CPI increased by 0.4%. While these inflation figures did not raise significant alarms, the real surprise came from the labor market.

Weekly Initial Jobless Claims surged to 263,000, a significant jump from the previous week’s 236,000 and the highest level viewn since October 2021. This unexpected increase in unemployment applications was a key factor in changing the market’s focus. The data provided further evidence that the US labor market might be cooling, which gives the Federal Reserve more room to ease its monetary policy without worrying about accelerating inflation.

3. The US Dollar fragileened as a Result of Fed Rate Cut Bets

The combination of moderate inflation and a fragileening labor market put significant bearish pressure on the US dollar. Following the data releases, the US Dollar Index (DXY) fell, and the EUR/USD pair pushed back above the 1.1600 mark later than an earlier decline. The market interpreted the jobless claims data as a clear sign that the Federal Reserve (Fed) is likely to proceed with its planned interest rate cuts.

According to the CME FedWatch Tool, markets are now fully pricing in a 25 basis-point rate cut at the upcoming Fed meeting. Furthermore, speculative interest has solidified expectations for a total of three Fed rate cuts by the end of 2025. The anticipation of these cuts has made the dollar less attractive to investors, as a lower interest rate environment would reduce the currency’s yield. This has created a “dovish repricing” of the dollar, leading to its overall fragileness against major currencies.

Top upcoming economic events:

Monday, September 15, 2025

• 02:00:00 – Industrial Production (YoY) & Retail Sales (YoY) (CNY)
  • Importance: These two releases from China are critical for understanding the health of the world’s second-largest economy. Industrial Production measures the output of factories and mines, while Retail Sales indicates consumer spending. Strong results suggest a robust economy, which can have ripple effects on global markets and commodity prices. Conversely, fragile numbers can signal a sluggishdown.

Tuesday, September 16, 2025

• 06:00:00 – Claimant Count Change, Employment Change (3M), & ILO Unemployment Rate (3M) (GBP)

Importance: This trifecta of UK employment data provides a comprehensive picture of the labor market’s strength. The Claimant Count Change tracks the number of people claiming unemployment benefits, while Employment Change and the ILO Unemployment Rate offer a broader view of job creation and the overall unemployment level. A strong labor market often supports consumer spending and can lead to inflationary pressures, which influences the Bank of England’s monetary policy decisions.

• 12:30:00 – Consumer Price Index (YoY) & BoC Consumer Price Index Core (YoY) (CAD)
  • Importance: These are key inflation indicators for Canada. The Consumer Price Index (CPI) measures the change in prices for excellents and services, while the core CPI excludes volatile items like food and energy to provide a clearer picture of underlying inflationary trends. The results will be a major factor in the Bank of Canada’s (BoC) upcoming interest rate decision and will heavily influence the value of the Canadian dollar.

Wednesday, September 17, 2025

• 13:45:00 – BoC Interest Rate Decision & BoC Monetary Policy Statement (CAD)
  • Importance: This is a top-tier event for the Canadian dollar. The Bank of Canada’s decision on interest rates is a direct tool for managing inflation and economic growth. The accompanying Monetary Policy Statement provides crucial insight into the central bank’s outlook on the economy, its rationale for the rate decision, and any potential future policy shifts.
• 18:00:00 – Fed Interest Rate Decision, Fed Monetary Policy Statement & FOMC Economic Projections (USD)
  • Importance: This is arguably the most significant economic event of the week. The Federal Reserve’s interest rate decision, and any change to it, has a massive impact on global financial markets, including equities and currencies. The accompanying statement and economic projections offer a detailed look at the Fed’s view on inflation, employment, and growth, providing guidance on the future path of monetary policy.
• 18:30:00 – FOMC Press Conference (USD)
  • Importance: Following the Fed’s rate decision, the press conference with the Fed Chair is where markets get real-time clarification on the policy decision and the economic outlook. The tone of the press conference can cause significant volatility in the US dollar and other assets, as traders and investors react to the central bank’s forward guidance.
• 22:45:00 – Gross Domestic Product (YoY) & Gross Domestic Product (QoQ) (NZD)
  • Importance: GDP is the broadest measure of economic activity and a key indicator of the overall health of New Zealand’s economy. Strong GDP growth signals economic expansion, which can support the New Zealand dollar, while a contraction could signal a recession.

Thursday, September 18, 2025

• 01:30:00 – Employment Change s.a. & Unemployment Rate s.a. (AUD)
  • Importance: These Australian labor market figures are crucial for the Reserve Bank of Australia’s (RBA) policy considerations. A strong labor market with low unemployment can put upward pressure on wages and inflation, influencing the RBA’s decisions on interest rates.
• 11:00:00 – BoE Minutes, BoE Monetary Policy Summary, BoE MPC Vote Rate Unchanged (GBP)
  • Importance: This release provides the minutes from the latest Bank of England (BoE) meeting, revealing how members voted on the interest rate decision and their discussions on the economy. The details within the minutes, particularly the vote breakdown, can give clues about the future direction of UK monetary policy and are a major driver for the British Pound.

Friday, September 19, 2025

• 03:00:00 – BoJ Interest Rate Decision & BoJ Monetary Policy Statement (JPY)
  • Importance: As the final major central bank event of the week, the Bank of Japan’s (BoJ) decision is a critical market mover for the Japanese Yen. While the BoJ has historically maintained a dovish stance, any shift in policy, or hints of a future change, would have a significant impact on global financial markets, given Japan’s status as a major global creditor.
• 06:00:00 – Retail Sales (MoM) (GBP)

Importance: This release measures the change in total value of sales at the retail level. It’s a key indicator of consumer spending, which is a major component of a country’s economic activity. A strong reading can support the British Pound and suggest a healthy economy, while a fragile reading can be a signal of economic fragileness.

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