Core Inflation Rises in Europe, Headline Declines

Euro Area Inflation Data

Core Inflation Rises Less Than Anticipated While Headline Inflation Cools Nicely

Core inflation in the Euro Area rose above last month’s 5.3% print but ended up less than estimates of 5.5%, settling at a marginally higher 5.4%. Headline inflation rose 0.3% month-on-month but came in lower than anticipated at 5.5% and much lower than last month’s figure of 6.1%. The disinflationary trend in headline inflation is unlikely to taper the ECB’s willingness to continue hiking rates due to the issue of core inflation remaining well off target.

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Divergence between core and headline measures of inflation has been commonly observed throughout developed economies and is on display to see in Europe. Yesterday’s German inflation report highlighted stubbornly high prices in Europe’s largest economy which appears to have been ineffective in outweighing disinflation witnessed in other Euro Area nations.

EUR/USD saw a slight lift in the pair on the news of higher, stubborn core inflation. Upside momentum may be difficult to come by as we head into the weekend given the US’s surprise upward revision in Q1 GDP from 1.4% to 2% – raising the likelihood of a 25 bps hike in the US in July. US core PCE data up next.

EUR/USD 5-Minute Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX