After mixed euro zone inflation data, where do ECB interest rate odds stand now?

Recent data showed the euro zone consumer prices were mixed as core inflation slowed down while main inflation stabilized in August.

An ECB official described the inflation data as "confounding" and complicating to the efforts of bringing inflation down to targets. 

Fresh pricing is now in for the chances of another 0.25% interest rate hike by the European Central Bank next month.

Inflation Data

Initial data showed European consumer prices up 5.3% in August, passing estimates of 5.1%, and same as July.

Core consumer prices rose 5.3% in August, same as expectations, and down from 5.5% in July. 

Core consumer prices are the main index followed by the European Central Bank to gauge inflationary pressures, thus chances of a 0.25% ECB interest rate hike diminished after the data. 

Remarks Austrian Central Bank Governor Robert Holzmann commented on the data by saying that inflation remains stubborn and represent a conundrum to the ECB. 

As for the future of European interest rates, Holzmann said that they haven't peaked out yet, and he expects one or two more interest rate hikes to come. 

European Rates

Markets are pricing in a 30% chance of an ECB interest rate hike at the September meeting, down from 40% in previous estimates.

Thus the euro tumbled against major rivals, including the dollar by nearly 0.6% away from recent two-week highs.