Euro extends its reversal below 1.1400 amid cooling Eurozone Inflation data

EUR/USD reverses previous weekly gains and returns below 1.1400.
Eurozone inflation cooled beyond expectations in June, easing pressure on the ECB to hike rates further.
ECB President Christine Lagarde and Fed Chairman Kevin Warsh are set to speak at a central bankers' meeting later on Wednesday.

Guillermo Alcala FXStreet

The Euro’s (EUR) mild recovery against the US Dollar (USD) seen earlier in the week has come to an end on Wednesday. The pair has returned to levels below 1.1400 during the European trading session, weighed by a significant slowdown in Eurozone inflation figures, shifting the focus back to the 13-month lows, at 1.1324 hit in June.

The pair is struggling amid a combination of soft Eurozone data and the revival of the narrative of US economic exceptionalism, as US macroeconomic figures keep showing a resilient economy and providing reasons for the Federal Reserve (Fed) to hike interest rates in the coming months.

Eurozone Inflation cools in June

Inflation figures from the Eurozone, released on Wednesday, have failed to support the Euro. June’s preliminary Harmonized Index of Consumer Prices (HICP) slowed down to a 2.8% year-on-year (Y-o-Y) growth, below the 3% market consensus and well below the 3.2% rate seen in May. Likewise, the core HICP has eased to a 2.4% Y-o-Y rate, down from May’s 2.6% reading.

These figures follow similar cooling trends in German and Italian consumer prices, shown by figures released on Tuesday. This new scenario suggests that the inflationary boost from the Middle East conflict might have peaked, which gives some leeway for the European Central Bank (ECB) to pause and wait for further insight into the impact of energy prices, before hiking interest rates further.

The cooling inflationary trends are likely to boost interest in ECB President Christine Lagarde’s speech at the central bankers’ meeting in Sintra, Portugal, due later on the day. Lagarde struck an unusually hawkish tone at the opening speech on Monday, and investors will be looking for dovish hints, following Wednesday’s inflation data.

Later on the day, the Federal Reserve’s new Chairman, Kevin Warsh, is also expected to take the stage at the summit, with investors looking for hints about the bank's monetary tightening calendar. Warsh, however, is more reluctant than his predecessor to disclose the bank's forward path and might tiptoe around the topic.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

Economic Indicator

Core Harmonized Index of Consumer Prices (YoY)

The Core Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, – released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Core HICP excludes volatile components like food, energy, alcohol, and tobacco. The Core HICP is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.