Eurozone inflation data
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Core inflation is rising less than expected, while headline inflation is cooling nicely
Core inflation in the euro zone rose above last month’s 5.3%, but ended below estimates of 5.5% and came in at a marginally higher 5.4%. Headline inflation increased by 0.3% month-on-month, but was lower than expected at 5.5% and much lower than last month’s figure of 6.1%. The disinflationary trend in headline inflation is unlikely to dampen the ECB’s willingness to continue raising rates due to the problem of core inflation remaining well off target.
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The divergence between core and headline measures of inflation has been commonly observed in developed economies and can be seen in Europe. Germany’s inflation report yesterday highlighted stubbornly high prices in Europe’s biggest economy, which appear to have been ineffective in offsetting disinflation seen in other eurozone countries .
EUR/USD saw the pair slightly higher on news of higher and stubborn core inflation. Upward momentum may be hard to come by as we head into the weekend given the surprise upward revision of US Q1 GDP from 1.4% to 2%, increasing the likelihood of a 25 bp hike in the US in July. Next, the core US PCE data.
EUR/USD 5 minute chart
Source: TradingView, powered by Richard Snow
— Written by Richard Snow for DailyFX.com
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