Wage growth in the Eurozone slowed in the second quarter, reducing the need to tighten monetary policy, and at the same time posing downside risks to the euro. Salary per employee rose 3.3% year on year, down from 3.5% in the first quarter of this year, and is very close to the 3% growth rate proposed by the ECB. The ECB said that in the medium term, this wage growth rate can roughly match the 2% inflation target. The data is unlikely to change market expectations for this week's ECB meeting. Economists and traders generally expect the central bank to raise interest rates by 25 basis points. However, the data made the market question whether it is necessary to continue to raise interest rates after this rate hike. The data also confirms that the effects of the second round of inflation are still within a manageable range, and this is an indicator that policy makers are focusing on. Relevant data shows that the EUR/USD exchange rate is becoming more sensitive to changes in interest spreads, which in turn responds strongly to changes in policy expectations. The market is currently priced to raise interest rates by about 75 basis points in total until mid-2027, and traders have every reason to lower their interest rate hike bets, thereby weakening the euro.

Wage growth in the Eurozone slowed in the second quarter, reducing the need to tighten monetary policy, and at the same time posing downside risks to the euro. Salary per employee rose 3.3% year on year, down from 3.5% in the first quarter of this year, and is very close to the 3% growth rate proposed by the ECB. The ECB said that in the medium term, this wage growth rate can roughly match the 2% inflation target. The data is unlikely to change market expectations for this week's ECB meeting. Economists and traders generally expect the central bank to raise interest rates by 25 basis points. However, the data made the market question whether it is necessary to continue to raise interest rates after this rate hike. The data also confirms that the effects of the second round of inflation are still within a manageable range, and this is an indicator that policy makers are focusing on. Relevant data shows that the EUR/USD exchange rate is becoming more sensitive to changes in interest spreads, which in turn responds strongly to changes in policy expectations. The market is currently priced to raise interest rates by about 75 basis points in total until mid-2027, and traders have every reason to lower their interest rate hike bets, thereby weakening the euro.