Data from Eurostat – the European Union’s statistics agency – showed headline inflation in the Euro Area easing from 2.6% y/y to 2.5% y/y as expected in June.
Core inflation, which excludes volatile items like energy, food, alcohol and tobacco, maintained its 2.9% y/y increase and outpaced market estimates of a dip to 2.8%.
Link to Euro Area’s June CPI report
Services inflation, which European Central Bank (ECB) members may be paying close attention to, remained sticky high at 4.1% y/y and matched May’s growth.
Meanwhile, energy prices decelerated slightly from 0.3% to 0.2% while food, alcohol, and tobacco inflation also slowed down a bit from 2.6% to 2.5%.
Market Reactions
Euro vs. Major Currencies: 5-min
Overlay of EUR vs. Major Currencies Chart by TradingView
The euro was already feeling the pressure from concerns that France may see a hung parliament after the next round of voting.
EUR was trading lower across the board before the slightly weaker-than-expected Euro Area flash CPI provided fresh selling momentum for the common currency.
The selling only lasted about an hour, however, and the euro soon traded with mixed results against its counterparts. It didn’t hurt that some traders focused on the sticky high services inflation and that a few ECB members hinted at waiting for more data before pulling the rate cut trigger again this year.
The euro recovered against safe havens like the Swiss franc, Japanese yen, and the U.S. dollar while maintaining its downswings against “riskier” currencies like AUD, GBP, NZD, and CAD.
