Month-end and quarter-end flows may have blurred the picture earlier in the week until yesterday, but we are seeing more of the same with stock futures pointing lower. US Treasury yields are also descending further and that is lighting a fire under the yen with USD/JPY slipping all the way back to 135.00 today. The weekly close will be interesting with the potential for a reversal candle in sight.

 EUR/USD has started to reverse down and today’s inflation data from the eurozone is unlikely to provide any new momentum. Some inflation figures from individual countries have already been published, and it looks as if the rate of inflation in the eurozone might have crept up further in June. Even the upside surprise which took CPI to 8.6% is not likely to cause the ECB to implement a larger rate step in July. The majority on the monetary policy council seems to prefer a cautious start, which today’s data is unlikely to change.

Yesterday’s Jump seems to be over

Eurozone June Preliminary CPI Inflation Report

• June preliminary CPI YoY +8.6% vs +8.4% expected
• May CPI was +8.1%
• Core CPI YoY +3.7% vs +3.9% expected
• May core CPI was +3.8%

The headline reading reaffirms another record inflation reading in the euro area, which may lay down the case for bigger rate hikes by the ECB. That said, with 75 bps already priced in for July and September, I don’t think policymakers will stray away from that. The only positive is that core inflation was seen easing to 3.7% from 3.8% in May – at least from the annual reading.

EUR/USD Live Chart