Euro Down as Euro-zone CPI Falls to Record Low of -0.7%

The euro finally broke down from its consolidation below 1.4300 as the US dollar rallied across the majors. European data certainly didn’t work in favor of euro strength either, as the Euro-zone consumer price index (CPI) fell more than previously expected. Indeed, CPI was initially anticipated to drop by 0.6 percent, but the final reading showed a record decline of 0.7 in July from a year earlier. Looking ahead to August 18, a steady rally in European equities throughout July to the highest levels since Q3 2008 is likely to underpin the case for a rise in German investor sentiment for the month of August. The ZEW survey on the economic outlook is forecast to rise to a more than 3-year high of 45 from 39.5, while sentiment on current conditions is projected to edge up to 7-month high of -85.5 from -89.3. Surprisingly strong results could lead the euro to gain following the news on a very short-term basis, but disappointing data would likely have a greater impact, and could trigger sharp declines in the currency.