EURO HOLDS FIRM ABOVE 1.1500 WITH EUROZONE INFLATION DATA IN FOCUS
EUR/USD traded above 1.1500 on Friday, remaining near a six-week high and gaining approximately 1.3% for the week—its strongest weekly performance in nearly four months.
Markets are focused on the Eurozone’s preliminary July inflation data. Headline HICP is expected to rise to 2.9% year-on-year from 2.8% in June, while core inflation is forecast to remain at 2.8%, above the European Central Bank’s 2% target.
Recent regional data indicated firmer inflation and economic activity. France’s annual CPI accelerated to 2.4% from 2.0%, exceeding the 2.1% forecast, while monthly prices rose 0.6% against expectations of 0.3%. Germany’s preliminary HICP increased to 2.8% from 2.4%.
Eurozone GDP expanded by 0.4% in the second quarter and 1.0% year-on-year, above forecasts of 0.2% and 0.5%, respectively. These figures strengthened market expectations of a possible ECB rate increase in September, although this remains a market-based expectation rather than a confirmed policy outcome.
From a price perspective, 1.1500 remains an important near-term reference. ING noted that the pair may continue to find support around this area, while questioning the sustainability of moves above 1.1600.
Market participants will continue to monitor Eurozone inflation data and changes in ECB policy expectations, which may contribute to increased EUR/USD volatility.
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