Euro Area CPI Eased Slightly But Services Inflation Remained Sticky High In June

Eurozone core inflation fell to 2.5% year-on-year in June from 2.6% year-on-year, data from Eurostat, the European Union’s statistics agency, showed.

Core inflation, which excludes volatile items such as energy, food, alcohol and tobacco, held steady at 2.9% year-on-year, beating market estimates of a 2.8% decline.

Link to Eurozone CPI report for June

Inflation in the services sector, which ECB members may be paying close attention to, remained elevated at 4.1% year-on-year, matching May’s growth.

Meanwhile, energy prices slowed slightly from 0.3% to 0.2%, while inflation in food, alcohol and tobacco prices also slowed slightly from 2.6% to 2.5%.

Market Reactions

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The euro is already feeling the pressure on fears that France could see a hung parliament after the next round of voting.

The euro fell broadly ahead of weaker-than-expected eurozone preliminary CPI reading, providing fresh selling momentum for the single currency.

But the selloff lasted only an hour, and the euro was soon mixed against its peers. It didn’t hurt that some traders focused on rising service sector inflation and that some ECB members hinted at waiting for more data before cutting interest rates again this year.

The euro recovered against safe havens such as the Swiss franc, Japanese yen and US dollar, while maintaining its declines against “riskier” currencies such as the Australian dollar, British pound, New Zealand dollar and Canadian dollar.

AreaCPIeasedeuroHighInflationJuneRemainedservicesSlightlysticky
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