Eurozone PMI weighs its currency

Daily Currency Update

European CPI flash estimate fell further, data showed on Friday, but core CPI edged higher. Much of the rise can be explained by German base effects, it was service inflation hit a new high and continues to worry the ECB. June CPI year-on-year retreated from 6.1% down to 5.5%, with core increasing 0.1% over the same period. EUR/USD bounced on the news, taking the currency pair back up to 1.0925, but weakened against the Pound with GBP/EUR seeing highs at 1.1655. The US also had inflationary headlines on Friday, releasing the core PCE price index which measures goods and services targeted towards and consumed by individuals. There were no surprises on the release, falling month-on-month from 0.4% to 0.3% as forecast. GBP/USD touched 1.2719 ahead of the release and is a little softer for today’s open.

A US bank holiday tomorrow, with 4^th July celebrations taking place. However, this doesn’t prevent the heavy-weight data expected from the US this week as markets anticipate the latest FOMC meeting minutes on Wednesday. US jobs data follow on Thursday and Friday. The Bank of England’s Governor Bailey is also due to speak on Friday. The USD will likely see volatility over this week.