The Eurozone still needs to keep an eye on inflation.

The Euro has slightly depreciated against the Dollar after the announcement of the inflation rate and a policy interest rate adjustment. Additionally, the President of the European Central Bank (ECB), Christine Lagarde, hinted at a temporary interest rate hike in September, with the expectation of further rate increases in the following months.

The ECB raised its interest rate by 25 basis points to 4.25%, marking the 9th consecutive rate increase. This decision was influenced by the persistently high inflation rate, even though inflation had been gradually decreasing. However, it has not yet reached the target set by the ECB. The central bank will continue to use economic data to make future interest rate decisions in order to bring inflation back to the target of 2%. It is projected that there will be another 25 basis points rate increase to 4.5% in the next month.

The inflation rate in the Eurozone decreased to 5.3% in July, which is a positive sign for the ECB. However, some policymakers believe that raising interest rates at this point may be too fast to bring inflation back to the 2% target. Investors remain uncertain about the ECB's interest rate hike decision. Nonetheless, analysts estimate a 70% chance of a temporary interest rate pause in September.

Dirk Schumacher, an economist from Natixis, stated that "the services inflation rate should be the most influential on monetary policy as it reflects domestic intentions. Therefore, the possibility of the ECB policymakers agreeing to a temporary pause in September should be observed based on the inflation rate at that time."

The Eurozone's manufacturing PMI decreased to 42.7 in July from 43.4 in the previous month, marking the lowest level in three years. This decline is due to increasing borrowing costs resulting from the ECB's interest rate hike, signaling a potential future production slowdown. The situation has led to the urgency of clearing inventory to maintain current operational levels, leading factories to adjust production requirements and decreasing demand for manufacturing inputs.

The Eurozone's services PMI also declined to 51.1 in July from 52.0 in the previous month, slightly lower than the market's expectations of 51.5. This decrease is attributed to a slowing hiring rate, reaching the lowest level in five months, and a decline in business confidence.

Techical analysis data (5H)

Resistance: 0.9107, 0.9115, 0.9124

Support: 0.9089, 0.9081, 0.9072

Source: Investing.com