Euro Rebounds Against Dollar on Contained Inflation Pressures

The euro has staged a modest rebound against the US dollar after recent strength in the greenback following Fed Chair Kevin Warsh's speech at Jackson Hole. According to Danske Bank, the EUR/USD pair has recovered above the 1.16 level.

Inflation data from Germany showed that HICP inflation increased to 2.9% year-over-year (y/y) in August, slightly below expectations of 3.1%. The details revealed higher energy and core goods inflation, while services and food inflation declined, leaving core CPI unchanged at 2.4% y/y.

Core inflation momentum remains contained at 2.5% three months/three months seasonally adjusted annualized rate (SAAR), indicating that energy prices have not yet transmitted broadly to underlying inflation. This is similar to the picture in France and Spain last week, where underlying inflation pressures remained contained.