Euro remains pinned at one-year lows against the British Pound as Euro Area inflation moderates

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The Euro (EUR) remains on the defensive against the British Pound (GBP) on Friday, with the EUR/GBP pair unable to take off from one-year lows at the 0.8515 area. Data from Germany and France confirmed that inflationary pressures moderated in June, which added pressure on the common currency.

EUR/GBP hovers at one-year lows near 0.8500 following soft inflationary figures in Germany and France.
This data adds to the case for an ECB pause at July's meeting.
In the UK, BoE's Pill affirmed that the bank will be forced to hike rates this year.

In Germany, the final Harmonized Index of Consumer Prices (HICP) confirmed previous estimations showing that inflation grew at a 2.4% year-over-year (y-o-y) rate in June, down from 2.7% in May and from April's 2.9% peak. Monthly inflation contracted 0.2%, also in line with preliminary estimations, following a 0.1% contraction in May.

Likewise, France’s Consumer Price Index (CPI) confirmed that yearly inflation eased to a 2% y-o-y rate in June, from the 2.8% reading witnessed in May. Monthly inflation contracted at a 0.3% pace, following a 0.1% uptick in the previous month.

Eurozone data hints at an ECB pause in July

These figures cement expectations that the European Central Bank will hit the pause button at the July meeting, buying time to assess developments in energy markets and their impact on the Eurozone’s economy.

The Pound, on the other hand, has drawn some support from comments by the Bank of England’s (BoE) Chief Economist, Huw Pill, one of the two hawkish dissenters at the latest BoE monetary policy meeting, pointing to upcoming rate hikes.

Pill, speaking at BBC’s “Walescast” programme on Thursday, affirmed that interest rates should rise before year-end, as, in his opinion, the central bank has been “running the economy a little bit hotter than the supply side”

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

Economic Indicator

Consumer Price Index (EU norm) (YoY)

The Consumer Price Index released by INSEE is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of the Euro is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as positive (or bullish) for the Euro, while a low reading is seen as negative (or bearish).