Sticky Inflation, Softer Dollar — ECB Throws a Curveball

Author

FX Rocket Profits
September 12, 2025

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Sticky Inflation, Softer Jobs & Central Bank Crosscurrents

Thursday’s trading session was a masterclass in mixed signals. U.S. CPI for August ticked higher to 2.9% y/y, with core holding at 3.1%, underscoring that inflation is still sticky — yet the dollar weakened as traders latched onto surging jobless claims and the dovish implications for the Fed. Markets are now pricing an even more aggressive easing path into year‑end.

Across the Atlantic, the ECB held rates steady for a second meeting, with President Lagarde declaring “the disinflationary process is over” and hinting the easing cycle may be done. Growth risks are now seen as more balanced, thanks in part to recent trade agreements. The euro initially rallied on the hawkish tone but faded against risk currencies as global equities surged.

The takeaway? Macro narratives are colliding — sticky inflation versus weakening labor data, hawkish ECB versus dovish Fed — and traders are left to navigate the crosscurrents with precision.

⚡Daily Broad Market Recap – September 11, 2025

  • Risk‑on mood took hold after U.S. jobless claims jumped to 263K, overshadowing hotter‑than‑expected CPI.

  • Equities hit fresh records; U.S. yields dipped below 4% intraday; dollar tumbled against most majors.

  • Gold eased to $3,635; oil fell 2% on IEA’s higher supply forecast.

🔥U.S. Headline CPI Ticked Higher in August, USD Still Weakened

  • Headline CPI rose 0.4% m/m (2.9% y/y); core CPI up 0.3% m/m (3.1% y/y).

  • Shelter, food, and energy costs drove the monthly gain; tariff‑sensitive categories also rose.

  • USD fell post‑release as Fed cut odds climbed to 92.5%, with steepest losses vs. AUD and NZD.

📊 ECB Holds Rates Steady, Signals Easing Cycle May Be Over

  • Deposit rate unchanged at 2.00%; inflation forecast for 2025 raised to 2.1%.

  • Lagarde: “The disinflationary process is over” and growth risks are “more balanced.”

  • Markets scaled back ECB cut expectations; euro finished mixed across majors.

This issue captures the push‑and‑pull between inflation data, labor market weakness, and central bank signaling. The Fed faces mounting pressure to cut despite sticky prices, while the ECB is hinting at a pause in easing. For traders, the opportunity lies in reading the divergence — and positioning ahead of the next macro catalyst.

Happy Trading!

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