Euro consolidates near 1.1450 as German data confirms easing inflationary pressures

EUR/USD edges up above 1.1450 but remains capped below last week's top, at 1.1475.
German inflation figures confirm that price pressures eased in June, adding to the case for an ECB pause in July.
The US Dollar trades lower across the board as hopes of a negotiated end to Iran's war remain alive.

Guillermo Alcala FXStreet

The Euro (EUR) holds minor gains against a somewhat softer US Dollar (USD) on Friday. The pair edged up to the mid-range of the 1.1400s, but it has failed to find acceptance above the top of the last two weeks' trading range, in the area of 1.1475, and is set to close the week practically unchanged.

In Germany, the final Harmonized Index of Consumer Prices (HICP) for June, released earlier on the day, confirmed the moderation in inflationary pressures anticipated by the preliminary reading, which eases pressure on the European Central Bank (ECB) to hike interest rates further at its July meeting.

German consumer inflation, as measured by the HICP, eased to a 2.4% year-over-year rate in June from 2.7% in May and April's 2.9% peak. Monthly inflation contracted 0.2%, also in line with preliminary estimations, and following a 0.1% contraction in May. The impact of these figures on the Euro has been marginal.

The rebound in Oil prices weighs on the Euro

The resumption of the hostilities between the US and Iran and the ensuing rebound in oil prices, with traffic through the key Strait of Hormuz plunging, has acted as a headwind for any significant Euro recovery this week.

The US military launched a series of strikes on Iranian targets earlier this week in retaliation for alleged attacks from Tehran on vessels attempting to cross Hormuz, and Iranian forces responded by targeting US bases in Gulf countries. Markets, however, have taken these acts as manoeuvres to gain leverage in fut¡ure negotiations, and risk aversion has remained contained, which kept the Euro from falling further.

In the US, the minutes of the last Federal Reserve (Fed) monetary policy meeting, released on Wednesday, showed a firm commitment to bring inflation to target. The central bank's governing board, however, was split on the near-term rate path, leaving investors pondering the timing for the next hike. The US Dollar retreated moderately after the release of the minutes.

(This story was corrected on July 10 at 07:29 GMT to say that German HICP contracted 0.1% in May, and not 0.% as previously stated.)

Economic Indicator

Harmonized Index of Consumer Prices (MoM)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

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EUR/USD turns positive, targets 1.1450

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Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.