Eurozone Preliminary CPI surprises positively with 0.4% YoY in July, EUR/USD uninspired

According to Eurostat’s flash reading of Eurozone CPI report, the annual reading came in at +0.4% in July, meeting expectations of +0.2% and +0.3% previous.

In June, the headline inflation hit four-year lows amid coronavirus pandemic-induced demand destruction.

Meanwhile, the core figure rises to +1.2% in the reported month when compared to +0.8% expectations and +0.8% previous.

Key details (via Eurostat)

“Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in July (2.0%, compared with 3.2% in June), followed by non-energy industrial goods (1.7%, compared with 0.2% in June), services (0.9%, compared with 1.2% in June) and energy (-8.3%, compared with -9.3% in June).”

The Eurozone inflation report comes a day after the German Prelim CPI data was released, which showed that the German consumer price inflation showed no growth in July at 0% and moved further away from the European Central Bank’s (ECB) rate target of just under 2% for the Eurozone as a whole.

Separately, the bloc’s Preliminary Gross Domestic Product (GDP) reading came in at -12.1% QoQ for Q2, missing the expectation of -12% and -3.6% reported in Q1. The annualized figure arrived at -15.0% vs. -14.5% expected and -3.1% last.

FX implications

The acceleration in the headline Eurozone inflation figure fails to impress the EUR bulls, as EUR/USD flirts with daily lows at 1.1850. The spot trades almost unchanged on the day.

The retracement in the spot from two-year highs of 1.1903 is mainly due to a quick comeback staged by the US dollar across its main peers.