Euro weakens ahead of key HICP release after cooler-than-expected inflation in Germany, France, and Italy reduces ECB rate hike bets.
EUR/USD slipped to 1.1390 in European trading on Wednesday, extending losses as the Euro faced pressure ahead of Eurozone Harmonized Index of Consumer Prices data. Germany’s June inflation dropped to 2.3% from May’s 2.6%, missing forecasts of 2.5% and signaling faster-than-expected cooling across the region.
The decline in inflation has lowered expectations for the European Central Bank to maintain elevated interest rates. Meanwhile, the US Dollar strengthened amid geopolitical tensions, with US-Iran talks in Doha stalled after Tehran refused direct meetings with US envoys.
Markets are also pricing in a 67% chance of a Federal Reserve rate hike by September, bolstering the Greenback. Attention now turns to Fed Chair Kevin Warsh’s speech at the ECB Forum in Sintra and upcoming US data, including ADP employment and ISM Manufacturing PMI.