|

Germany annual CPI inflation holds steady at 2% in July vs. 1.9% expected

  • Annual inflation in Germany remained unchanged at 2% in July.
  • EUR/USD stays in positive territory near 1.1450 in the early American session.

Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), held steady at 2% in July, Destatis' flash estimate showed on Thursday. This reading came in above the market expectation of 1.9%.

On a monthly basis, the CPI rose by 0.3% after staying unchanged in June.

The Harmonized Index of Consumer Prices in Germany, the European Central Bank's preferred gauge of inflation, rose 1.8% on a yearly basis after increasing 2% in June. This reading came in below analysts' estimate of 1.9%.

Market reaction

The EUR/USD pair showed no immediate reaction to these figures and was last seen trading at 1.1450, gaining 0.4% on the day.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

More from Eren Sengezer
Share:

Editor's Picks

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY sits at two-week highs above 156.00 ahead of BoJ verdict

USD/JPY catches some bids in the Asian session on Friday after data showed Japan's core consumer inflation held near the BoJ’s 2% target in August. The pair trades above 156.00 as traders await the BoJ's expected interest rate hike to a 31-year high. Meanwhile, softer US bond yields undermine the US Dollar, capping the pair's upside.

Gold holds around $4,350 as softer US bond yields cap USD

Gold trades with a positive bias for the second straight day and holds around $4,350 during Friday's Asian session, though upside seems capped. US bond yields move away from multi-year highs amid a pullback in oil prices, capping the US Dollar and supporting the non-yielding bullion. However, the Fed's hawkish stance and geopolitical risks limit USD losses, keeping XAU/USD below the weekly top, set on Thursday.

S&P Global to acquire OpenZeppelin in on-chain security expansion
S&P Global (SPGI) has agreed to acquire blockchain security firm OpenZeppelin as the financial data and analytics company expands its on-chain risk assessment capabilities. The acquisition, announced Thursday, will bring OpenZeppelin’s smart contract security services, development tools and open-source libraries into S&P Global’s existing digital asset and risk assessment business.
Silver is the metal the Copper rebound left behind
Copper producers answered a price near $14,000 a tonne by making more copper in the first half of 2026, and the way they did it means the silver shortfall gets no relief from the mines that supply more than a quarter of the world's silver. Copper is produced two ways.
How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.