Euro dips below 1.19, German CPI eases

The euro has posted slight losses for a second straight day. In the European session, EUR/USD is trading at 1.1898, down 0.22% on the day.

German CPI edges lower

With major economies reopening, the unleashing of pent-up demand has resulted in higher inflation. This development has the potential to inflict damage on the economy, so central bank policymakers are keeping a close eye on inflation moves.

Last week, ECB President Christine Lagarde stated last week that she does not expect the surge of inflation in the US to have any spillover effect in the eurozone. Lagarde noted that the recovery in the US has been much stronger than that of the eurozone, which has resulted in a surge of inflation in the US. As for the eurozone, Lagarde said that the economy is improving as the Covid situation improves, but she expects inflation to remain subdued.

German CPI for June appeared to back up Lagarde’s comments. CPI matched the consensus, coming in at 2.3% y/y and 0.4% m/m. This was slightly lower than the previous readings of 2.5% and 0.5%. The annualized read is still above the Bundesbank’s target of 2%, but policymakers will be pleased that inflation is getting closer to the inflation target.

How is the German economy performing? The answer, it seems, depends on who you ask. Businesses seem optimistic about economic conditions, as German ifo Business Climate for May punched across the 100-level for the time in over two years.

Consumers, on the other hand, are much less optimistic. Germany’s GfK Consumer Climate for June came in at -0.3. Still, this was an improvement over the previous reading of -7.0 points. With the German economy reopening, it would not be surprising to see consumer confidence push into positive territory in the next month or two.

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EUR/USD Technical

The support and resistance lines remain unchanged:

• There is resistance at 1.1992 and 1.2047
• EUR/USD has support at 1.1865. Below, there is support at 1.1793

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

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