Euro was seen in a lower position under the limit of 1,1600 to the US dollar. That was happened in the Europe trading session two days ago. 

Although the area inflation data increased significantly to its highest record in 13 years. The increase this time maybe will not change the interest rate outlook in the EuroZone. 

In the other side, it adds the new problem for the European Central Bank or the ECB. Eurostat reported that the Eurozone inflation accelerated by 3.4 percent (Year-on-Year) in September 2021. 

The figure was the highest since September 2008. It is also surpassing the consensus expectations of 3.3 percent. What makes the price is increasing? 

The Supply Chain is still not good

The increase in prices is mainly occurred due to a surge in energy prices and supply chain disruptions. The price of durable goods jumped up to 2.3 percent so far. 

That is impacting various sectors ranging from the car factories to computers. Combined with the ongoing energy crisis, this situation is rising the burden for some companies.

In fact, the ECB expects the companies to be able to adjust their prices while boosting the wage growth. It is needed to encourage a healthier and more sustainable pace of inflation.

The Latest ECB policy statement reveals a view that current upward trend in inflation will fade slowly next year. So far, the economist still agree about this thing.

This Condition is just Temporary 

Because the rate of inflation that increases due to the rising in energy prices alone will not last long. As a result, this current is likely to have no impact on ECB interest rate policy.

The History is pretty clear; When the energy component rises year-on-year, it only lasts a short period of time, although the price levels remain high in the market. 

That opinion was said by Claus VVistesen, the Chief Eurozone Economist at Pantheon Macroeconomics. They have their own point of view about the overall condition. 

Pantheon Macroeconomics said that the supply chain disruptions could push up more durable inflationary pressures. However, they still expect the eurozone inflation rate to fall in the first quarter of 2022. 

The US Dollar Is Weakening

They also predict the ECB will continue to maintain it’s loose monetary policy. It is although a pandemic-specific obliigation purchase program (PEPP) expires in March.

Meanwhile, the US Dollar was closed in a weakening position at the end of last week. It is although the released economy data was quite positive in the market. 

The United States ISM Manufacturing reportedly rose from 59.6 to 61.1 in September, higher than expectations of a decline to 59.6. The increase was due to a surge in supplier delivery surveys. 

Meanwhile, the University of Michigan's version of the US consumer Sentiment showed a rise from 71.0 to 72.8 in September. It can bring various reactions in the market. 

How the USD Reacts to It? 

The US dollar did not necessarily rise to welcome the release of the positive data above. That is because it was affected by the decline in the America’s bond yields and investor profit taking action. 

The U.S. 10-year bond yield fell about six basis points to 1.484%. It is happened after being a major factor supporting the strengthening US dollar over the past week.

Aside from the weakness, the analysts still expect that the USD to strengthen in the short term. The fed's stimulus reduction that is likely to be implemented in November is one of the strong catalysts.

That also supports the attractiveness of that major currency in the eyes of investors. Besides that, it also has a role as a safe haven currency amidst the global concern due to the COVID-19.