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Euro Analysis and Talking Points

  • Eurozone Inflation hits 2%, however, core inflation remains subdued
  • Euro supported by month-end USD selling and EU immigration deal

Eurozone Inflation hits 2%, while ECB’s preferred measure remains subdued

Eurozone inflation hit the ECB’s target for the first time in more than a year, rising 2% Y/Y from 1.9% in June, matching estimates. Yet again the headline figure had been led by energy prices, which surged by 8% (Prev. 6.1%), while food, alcohol and tobacco jumped by 2.8% from 2.5% in May. Core inflation printed at 1%, meeting forecasts, however dipped from the prior month by 0.1ppt.

EUR up as Eurozone Inflation hits 2% led by surge in oil prices

Source: Eurostat

ECB Announces Plans to Exit QE on Growing Inflation Confidence

Earlier this month, the ECB announced plans to exit from its ultra-loose monetary policy with bond buying set to end in December with the central bank increasingly confident that inflation will settle at close to but below 2% over the medium term. However, the rise in inflation has largely been led by the surge in energy prices, while core inflation continues to remain subdued which in turn has led to the ECB keeping to its cautious stance with a rate hike not seen till September 2019 at the very least.

Euro Supported by Immigration Deal

The Euro is among the outperforming currencies today following reports that the EU struck an eleventh hour immigration deal on the highly charged issue of immigration into the bloc. Alongside this, month end selling in the USD has also helped push the Euro higher with the pair hovering around 1.1650.

EURUSD PRICE CHART 1: 1-MINUTE TIMEFRAME (Intra-day)

EUR up as Eurozone Inflation hits 2% led by surge in oil prices

Is the Euro recovery temporary?

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX