The inflation rate in Europe remains high.

The European Central Bank (ECB) has revealed that several policymakers within the ECB wanted the ECB to raise interest rates by more than 0.25% at a previous meeting. However, the policymakers agreed to a modest increase of 0.25% to 3.25% at that meeting. As long as the ECB continues to raise interest rates, the inflation rate in Europe is expected to remain high.

The central bank leaders of Germany, the Netherlands, and Ireland have signaled that there is a chance for the ECB to further increase interest rates at the meeting on July 27th. The policymakers within the ECB have a consensus that the outlook beyond July is highly uncertain.

The Eurozone's inflation rate, as measured by the Consumer Price Index (CPI), decreased from 7.0% in April to 6.1% in May. While this is lower than the projected figure of 6.3%, it still remains significantly higher than the ECB's inflation target of 2%. This inflation data supports the expectation that the ECB will raise interest rates further.

The underlying inflation rate in the Eurozone, which excludes food and energy prices (Core CPI), is currently at 3.25%. The inflation rate in the services sector has slowed down from 5.2% in April to 5.0% in May, and the inflation rate in the industrial goods sector has decreased from 6.2% in April to 5.8% in May. However, the inflation rate in food prices has remained high, although it decreased from 13.5% in April to 12.5% in May.

Carsten Brzeski, an economist at ING, stated, "The inflation trend in Europe is heavily influenced by two conflicting factors. Firstly, low energy prices due to unseasonably warm weather during the winter, and secondly, upward wage pressure and persistently high inflation in the services sector. These factors are expected to keep the underlying inflation rate at a high level going forward."

Christine Lagarde, the President of the European Central Bank (ECB), has stated that the inflation rate in the Eurozone remains too high. Therefore, it is necessary for the ECB to maintain a strong policy stance, despite the increasing evidence that previous interest rate hikes are starting to take effect.

Individual investors also predict an 85% chance that the ECB will raise interest rates by 0.25% to 3.50% at the meeting on June 15th. There is a 15% chance that the ECB will increase interest rates by 0.50% to 3.75% at the same meeting. Investors speculate that the ECB may further raise interest rates in either July or September, which would result in a deposit interest rate of 3.75% by the end of this summer.

As for the Dollar Index (DXY), which measures the movement of the dollar, it has seen a significant increase. This is due to the U.S. Labor Department's announcement on Friday that nonfarm payrolls surged by 339,000 positions in May, surpassing analysts' expectations of around 190,000 positions. Additionally, the job figures for May were close to the 12-month average of 341,000 positions.

Technical analysis data (5H)

Resistance: 0.9353, 0.9361, 0.9368

Support: 0.9338, 0.9331, 0.9323

Source: Investing.com

 

Pivot Points June 5, 2023 11:02 AM GMT+7