Eurozone core Harmonised Index of Consumer Prices (HICP) month-on-month stayed at 0.9% in April. This matched the previous reading.
The data shows no change in core consumer price growth compared with the prior month. It focuses on underlying prices in the euro area.
Eurozone Core Inflation Stays Elevated
The latest Eurozone core inflation figure for April shows month-over-month prices rose by a stubborn 0.9%. This indicates that underlying price pressures are not easing as we had hoped. This is a significant setback for the European Central Bank, which has been trying to get inflation under control for two years.
We should anticipate the ECB will signal a more aggressive stance at its next meeting in June. Looking at the market, overnight index swaps are already pricing in a higher probability of another 25 basis point rate hike this summer, a possibility that was fading just weeks ago. Since the ECB’s deposit facility rate is already at 4.75%, this data makes a move to 5.0% or higher a real possibility before autumn.
This persistent inflation strengthens the case for a stronger Euro against the dollar in the near term. The Federal Reserve has been signaling a potential pause, so this policy divergence should favour the Euro. We should consider positioning for a move in EUR/USD towards the 1.15 level we last tested in late 2025 by using call options or futures.
For equities, this outlook is negative as higher interest rates for longer will squeeze corporate profit margins. We should therefore look at protective put options on major European indices like the EURO STOXX 50. This is especially true for interest-rate-sensitive sectors such as real estate and technology, which led the market downturn back in 2024.
Volatility And Trading Opportunities
This data also suggests that market volatility will likely increase in the coming weeks. The uncertainty around the ECB’s terminal rate creates an environment where trading volatility itself could be profitable. We could see the VSTOXX index, which measures Euro Stoxx 50 volatility, climb back above 20 points, a level it has not consistently held since the banking turmoil of early 2025.
