Euro area flash CPI inflation data for May was released today at 10:00 am BST. Data was expected to come in lower compared to April. Those expectations were further supported by lower-than-expected CPI readings from Spain, France and Germany released over the past two days, setting a stage for a potential downside surprise in euro area data.
Actual report for the whole euro area confirmed this view - CPI inflation came in below economists' expectations in May. Headline CPI inflation dropped to the lowest level since February 2022 while core gauge came in at the lowest level since January 2023. This highlights that the ongoing deceleration in headline inflation is driven primarily by lower energy prices.
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- Headline: 6.1% YoY vs 6.3% YoY expected (7.0% YoY previously)
- Core: 5.3% YoY vs 5.5% YoY expected (5.6% YoY previously)
Market reaction to the data was small as such outcome was widely expected after data from EMU member states. EURUSD dropped in a knee-jerk move but has managed to recover from losses and is now trading slightly above pre-release levels.
EURUSD at 5-minute interval. Source: xStation5
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