Euro Breaking News: German CPI Breaks Disinflationary Trend, Euro Dips

German CPI/HICP Beat Estimates

German inflation rises across all measures in the month of June
ECB likely to continue hawkish tone due to stubborn inflation. Euro to remain supported
Surprising US GDP data lifts the dollar, sending EUR/USD sharply lower moment after release
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German Inflation Rises on all Measures in the Month of June

CPI in Germany rose above last months 6.2% and the consensus estimate of 6.3% to print at 6.4% – ending the downward trend in headline inflation that has developed throughout the year. The more widely comparable measure within the euro zone, HICP also revealed a hotter month-on-month print and coming in at 6.8% which was inline or slightly above expectations depending on the source of surveyed data used. Either way, the higher print will only embolden Christine Lagarde and the rest of the governing council members as they continue to talk up future rate hikes.

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Today’s German data tends to influence the wider EU inflation data that is due tomorrow, potentially adding to a higher than expected print there. Since inflation remains in discussion this week, after EU inflation data tomorrow we will get US PCE data – the measure preferred by the Fed.

Immediate Market Reaction

The immediate euro reaction was rather muted, given that prices had been bid higher in anticipation of the date. 30 minutes later however, a massive upward revision to the final US GDP figure for Q1 saw the dollar shoot higher, sending EUR/USD sharply lower.

EUR/USD 5-Min Chart

Source: TradingView, prepared by Richard Snow

The US data has influenced intra-day trading observed on the daily chart, switching from positive to negative as prices trade below 1.0910 at the time of writing.