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29/05/24
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EUR Inches Down on German Inflation Accelerating
On Wednesday the euro was quiet, and EUR/USD traded at about 1.0840, 0.14% lower for the day in the North American session.
In May, the inflation rate in Germany rose to 2.4% y/y, after a gain of 2.2% in March and April. The reading was as expected, which explains why the euro’s reaction was muted.
This was the first time in 5 months that Germany’s inflation had accelerated, and the increase was mainly driven by higher food and services prices. Inflation only rose 0.1% on a monthly basis, much lower than April’s gain of 0.5% and lower than the 0.2% market estimate. Core CPI, excluding energy and food was steady at 3.0%.
The higher-than-expected inflation number shows that inflationary pressures are still active in the biggest economy in Europe. CPI in the Eurozone is due to be released on Friday and is expected to inch up to 2.5% y/y, compared to April’s 2.4%.
The European Central Bank will be watching the eurozone’s CPI carefully, which will be released less than a week before the ECB’s next meeting. The central bank has indicated that it will cut rates at the meeting on June 6. Last week, ECB President Christine Lagarde said it was very likely that rates will be cut in June.
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