This week, key Eurozone data includes September’s flash CPI, August’s unemployment rate, and August’s PPI numbers, with Germany’s inflation and unemployment figures also in focus. The Euro has risen after Spanish inflation increased to 3.0% in September, hinting at broader Eurozone inflation rising to 2.2%, which may discourage further ECB interest rate cuts and support euro bulls. ECB Chief Economist Philip Lane sees no major inflation risks, suggesting stable rates, while some economists predict the ECB will maintain its 2.00% deposit rate through 2026, though a small cut remains possible. Despite hawkish ECB views, potential trade uncertainties and economic weaknesses could revive dovish policies. Germany’s stable 6.3% unemployment and 2.2%-2.3% inflation rates reflect persistent price pressures, driven by food prices and easing energy deflation. Long-term, ECB caution contrasts with expected aggressive Fed rate cuts, supporting EUR strength, alongside Germany’s reforms boosting Eurozone growth prospects.

The Bank of Japan is under increasing pressure to raise interest rates, with two board members advocating for a quarter-point hike at the September meeting, signaling a hawkish shift despite Governor Kazuo Ueda’s cautious stance. Rising inflation, particularly in food and daily goods, and a potential yen drop are fueling calls for a rate hike as early as October, especially if economic data remains strong and the U.S. avoids a downturn. The upcoming Tankan survey and Deputy Governor Uchida’s speech this week could provide further clues on BOJ’s policy direction, while Japan’s industrial production and retail sales weakened in August, though manufacturers expect a rebound in September. The Liberal Democratic Party’s leadership race, with Shinjiro Koizumi as a frontrunner, may influence BOJ’s confidence in raising rates, potentially strengthening the yen if Koizumi wins.

The Reserve Bank of Australia maintained the cash rate at 3.60%, citing stable labor markets, recovering demand, and persistent inflation, signaling a cautious, data-driven approach with no immediate rate cuts expected. Despite recent rate cuts still impacting the economy, the RBA remains vigilant about inflation and global risks, suggesting a hawkish stance that may prolong restrictive monetary policy. Recent data shows a sharp decline in building approvals and private sector housing, highlighting weakness in construction and housing demand, while private sector credit growth remains steady but shows no significant acceleration.