Yesterday's minutes from the ECB's September meeting did little to support the euro. The document shows the central bank that sees an energy shock but does not yet see a wage-price spiral. That aligns with Chief Economist Philip Lane's recent message: "middle path," a pause in October and a hike in December. Proponents of gradual tightening win; those who expected tougher ECB action lose. I see little novelty in the minutes — markets react to surprises — which is why the euro didn't move strongly.

What the central bank liked was the labor picture. Headline inflation in August accelerated to 3.3% from 2.9%; energy rose by 14.3%; food inflation held at 1.2%. Yet, Lane judged secondary effects absent for now. Policymakers' forecasts map a long road back to target: headline inflation is projected at 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028; core inflation at 2.5%, 2.6%, and 2.3% respectively — forecasts for 2027 and 2028 were nudged up 0.2 and 0.1 percentage points. Growth forecasts were modestly raised: 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028.

Markets and rates in the minutes look notably tighter than current market pricing. The terminal rate of the cycle is now above 3% for the first time, and the market is pricing in 84 bps of hikes through end-2027 versus 64 bps in July, while an analyst survey expected only a final hike in September. The picture has shifted: a pause on October 29 is now widely expected, with a final hike penciled in for December to around 2.75%. That means the market slowed the pace but not the direction. For the euro, this is unwelcome: fewer promised hikes mean less support from rate differentials.

ECB attributes the rise in yields to large US issuance, fiscal concerns, and inflation uncertainty. The curve in the euro area shifted up almost in parallel, and the long end moved higher due to a term premium, reflecting larger debt volumes and fiscal uncertainty. Today, this is the weakest point of comparison: the spread between French and German bonds is at its widest since 2011, and France is currently setting the tone for euro sentiment.

The minutes also note unemployment holding at 6.4%, a decline in job vacancies to 2.1%, a rebound in consumer confidence from low levels, and industry returning to growth, supported by defense and infrastructure spending. The euro-area budget deficit is projected to widen from 3.0% of GDP in 2025 to 3.6% in 2026 and 3.7% in 2027, with a 0.5 percentage-point fiscal easing in 2026 that will reverse in 2027–28 and act as a drag on growth.

The euro's takeaway is twofold. On the one hand, the report confirms the ECB won't force faster tightening. On the other hand, it gives the bank a clear near-term roadmap, offering predictability but not a strong impulse.

In my view, the euro will remain range-bound in the coming weeks, with upside attempts capped by a strong dollar and expensive oil. A meaningful rebound requires either a coordinated Berlin-Brussels response to the French situation, a decline in Brent, or weak US inflation prints. The next test is the October 29 ECB meeting: a pause combined with hawkish rhetoric would give the euro some support, while a pause that signals dropping the December hike would hit the currency.

EUR/USD technicals

Buyers need to reclaim 1.1240 to target a test of 1.1275. From there, the path to 1.1310 will open, but doing so without support from major players will be challenging. On the downside, I expect significant buyer interest only around 1.1200. If that level doesn't hold, wait for a break below the one-month low at 1.1165 or consider long entries at 1.1130.

GBP/USD technicals

Sterling buyers need to take the nearest resistance level of 1.3250 to target 1.3280. A break above that level will make it possible to extend gains to 1.3310. On the downside, bears will try to take control at 1.3215. If they succeed, a range break would hit bulls hard and push GBP/USD toward the 1.3180 low, with the potential to reach 1.3155.