Eurozone inflation data
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Core inflation rose less than expected while core inflation cooled nicely
Core inflation in the Eurozone rose above last month’s reading of 5.3% but ended below estimates of 5.5%, holding at a marginally higher 5.4%. Headline inflation rose 0.3% month over month, but it came in lower than expected at 5.5% and well below last month’s figure of 6.1%. The headline inflation headwind is unlikely to dampen the ECB’s willingness to continue raising interest rates as the core inflation issue remains off target.
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The divergence between core and general measures of inflation is generally observed across advanced economies and is shown to emerge in Europe. Yesterday’s German Inflation Report highlighted higher prices in Europe’s largest economy which appeared to be ineffective in overcoming inflation seen in other Eurozone countries.
EUR/USD saw a slight rally in the pair after news of stubbornly higher core inflation. Upside momentum could be hard to come by heading into the weekend given the US’s surprise upward revision in Q1 GDP from 1.4% to 2% – increasing the potential for a 25bps rally in the US in July. US core PCE data up to next.
5-minute chart of EUR/USD
Source: TradingView, prepared by Richard Snow
– Posted by Richard Snow for DailyFX.com
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