Eurozone headline CPI drops but services hotspot remains – Scotiabank

Eurozone August CPI rose a preliminary 0.2% in the month and was 2.2% higher over the year, down from 2.6% in July and in line with expectations, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR consolidates

“Core inflation eased a tenth to at 2.8% Y/Y from July’s read and services inflation rose to 4.2%, from 4%. Core and services inflation suggest a cautious approach to ECB rate cuts ahead. ECB Governor Muller said that confidence in a September rate cut (which is fully priced in) is growing but the policy path after that is ‘less certain’.”

“Softer trends in the EUR may be developing. A soft close on the week suggests some developing reversal potential on the longer run charts. Intraday price action rather suggests the EUR is consolidating this week’s losses in a tight range, but the EUR is clearly having some trouble holding even minor gains to the 1.11 area for now.”

“Weakness through 1.1050/55 support may see the EUR edge back to 1.0990/00.”