On Tuesday, the EURO rally ran out of momentum after rallying 1% over the last two days. EUR/USD traded at about 1.1110, up 0.22% for the day in the North American session. The EURO hit 1.1116 earlier, the highest level this year.
In July, the annual inflation rate in the eurozone rose from 2.5% in June to 2.6%, and the same as the preliminary estimate. This was higher than the 2.4% initial market estimate. The CPI increase was driven by a sharp increase in energy costs, while food inflation decreased slightly.
CPI declined from 0.2% to zero monthly, and as per expectations. Core CPI remained the same at 2.9%, higher than the initial 2.8% market expectations.
Services contributed the most to the eurozone’s annual inflation rate came, which was at 4% in July, down from June’s 4.1%. This is twice the ECB’s 2% inflation target.
The rise in eurozone inflation, along with high wage growth and the weak eurozone economy will make it tricky for the ECB to implement a rate cut at its September meeting. In June, the central bank cut rates by 0.25%, the first cut in response to dropping inflation.
