• Eurozone core inflation surprises on the upside
• Eurozone GDP accelerates to 0.3%

The euro is showing little movement on Monday. In the North American session, EUR/USD is trading at 1.1023, up 0.06%.

It has been a wild ride for the euro over the past two weeks. On July 18^th, EUR/USD hit its highest level since February 2022, but the same day, the euro began a slide which saw it drop almost 300 points. Interestingly, the euro had a muted reaction to Monday’s eurozone inflation and GDP reports.

Eurozone inflation for June was within expectations. Headline CPI dropped from 5.5% to 5.3% y/y, matching the consensus estimate. Core Cpi remained steady at 5.5%, a notch higher than the consensus of 5.4%. Core CPI, which is closely watched by the ECB, hasn’t improved much from the 5.7% gain in March, which marked a record high. The inflation report shows that inflation remains stubbornly high, and will provide support to ECB members who favor a rate hike at the September meeting.

The ECB raised interest rates last week, which came as no surprise as the ECB had signalled that it would do so. What happens next is anyone’s guess. ECB Lagarde said at last week’s meeting that “the September meeting will be deliberately data-dependent”. This didn’t clear up any uncertainty or really say anything, as the ECB has abandoned forward guidance and made rate decisions based on key data, especially inflation and employment reports. The ECB could go either way in September – inflation remains well above the 2% target, which would support a hike, but the eurozone economy remains weak and some members may wish to pause in order to avoid a recession.

There was a bright spot in Monday’s releases as eurozone GDP rose to 0.3% in the second quarter, up from 0.0% in Q1. We’ll get a look at German and eurozone Manufacturing PMIs on Tuesday.

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EUR/USD Technical

• EUR/USD is testing resistance at 1.1037. The next resistance line is 1.1130
• There is support at 1.0924 and 1.0831