Inflation not seems to be a urgent concern within the eurozone, holding regular at a degree that permits the European Central Financial institution (ECB) some respiratory house — no less than for now.
In line with preliminary figures launched by Eurostat on Friday, shopper costs rose 2% year-on-year in July, the identical tempo as in June. On a month-to-month foundation, costs had been flat.
Though economists had anticipated a slight dip to 1.9% year-over-year, the studying validates the ECB’s technique following years of persistent inflationary strain.
Wanting on the primary classes, meals, alcohol and tobacco noticed the best annual inflation fee at 3.3% in July, up from 3.1% in June.
Providers adopted at 3.1%, down from 3.3%, whereas non-energy industrial items rose to 0.8%. Power costs stayed in detrimental territory at -2.5%.
Core inflation, which excludes risky meals and vitality costs, was unchanged at 2.3%, although the month-to-month determine slipped by 0.2% — the primary detrimental studying since January 2025.
Amongst member states, Estonia and Croatia recorded the best annual inflation charges at 5.6% and 4.5% respectively, whereas France and Cyprus noticed the bottom, at 0.9% and 0.1%.
On a month-to-month foundation, costs in Croatia jumped by 1.2%, whereas Italy noticed a notable decline of 1%.
ECB coverage outlook: Wait and see
The ECB held rates of interest regular in July, signalling the top of a year-long easing cycle that noticed borrowing prices lowered eight occasions to ranges not seen since November 2022.
Final week, President Christine Lagarde famous the central financial institution is ‘in a very good place’ however cautioned that assessing the long run affect of tariffs stays tough amid a mixture of inflationary and disinflationary forces.
This inflation information reinforces the ECB’s present wait-and-see strategy, with policymakers now how the EU-US commerce deal will form the value atmosphere.
Is the euro below renewed strain?
After posting its greatest first-half efficiency since its inception, the only foreign money ended July in detrimental territory — its first month-to-month decline this 12 months.
Many of the losses occurred within the last week of the month, with the euro depreciating 2.8% in opposition to the US greenback to succeed in 1.14, a seven-week low.
The turning level got here as buyers judged the newly introduced commerce deal between US President Donald Trump and European Fee President Ursula von der Leyen as extra advantageous for Washington.
This sentiment, mixed with sturdy US financial information, an uptick in American inflation, and a Federal Reserve determination to carry charges regular at 4.25–4.50% with out signalling imminent cuts, accelerated the euro’s slide.
This marked the euro’s worst weekly efficiency since September 2022, when vitality market turmoil pushed the foreign money under parity to a low of $0.9535.
Whereas present circumstances are far much less excessive than three years in the past, upcoming information releases and the evolving affect of tariffs and commerce coverage can be essential in figuring out the euro’s trajectory by way of the rest of the 12 months.
Market response: Equities retreat amid tariff uncertainty
European fairness markets got here below strain on Friday, as buyers reacted to renewed commerce tensions sparked by President Trump’s announcement of a ten% baseline world tariff and extra retaliatory levies — starting from 25% to 41% — on international locations with out formal commerce agreements.
India, Canada and Switzerland had been among the many hardest hit. China was notably excluded, pending a separate deadline on 12 August.
The EURO STOXX 50 dropped 1.7%, whereas the broader STOXX 600 slipped 1.3%.
Nationwide benchmarks additionally suffered: Germany’s DAX fell 1.7%, Italy’s FTSE MIB misplaced 1.9% and France’s CAC 40 declined 1.8%.
A number of large-cap shares posted steep losses. AXA tumbled 6% after reporting a drop in web revenue, whereas Daimler Truck shed 5% following a revenue warning. Siemens Power, Sartorius and Airbus additionally recorded losses of greater than 3%.
Pharmaceutical shares confronted renewed strain after the US administration issued letters to 17 main drug producers urging decrease costs.
Novo Nordisk dropped 4.7%, bringing its weekly decline to 33% — the steepest within the firm’s historical past.