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02/07/24
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EUR Drops as Inflation Edges Lower
On Tuesday, the euro was slightly lower, and EUR/USD traded at about 1.0719, down 0.19% for the day in the European session. Although the euro on Monday hit a two-week high and rose to 1.0776, it couldn’t consolidate and ended the day virtually unchanged.
The annual inflation rate for the eurozone in June fell to 2.5%, compared to 2.6% in May and in line with market forecasts. The slight drop was driven by the slower pace of price rises for energy and food.
CPI was unchanged at 0.2% on a monthly basis, matching the consensus estimate. Core CPI was unchanged at 2.9% y/y, slightly higher than the 2.8% market estimate.
The downward inflation move is good news and comes after a drop in June inflation in Spain, France, and Germany. Services inflation in the eurozone in June rose 4.1% y/y, more than double the ECB’s 2% target.
The inflation report won’t lead to the European Central Bank cutting again in July, after an initial 0.25% cut earlier in the month.
On Tuesday, Governing Council member Madis Muller said that the ECB would be patient with further rate reductions and warned against underestimating price persistence. Pierre Wunsch, another member, said that although another cut was an easy decision, there was no urgency.
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