The economy in the Eurozone is improving but inflation remains persistent.

The Euro remains weak and continues to depreciate steadily, despite some positive economic indicators. The strengthening of the US Dollar remains a significant factor contributing to the overall depreciation of global currencies in this period. The European Central Bank (ECB) has signaled the necessity to maintain interest rate increases to curb inflation and bring it down to the 2% target. This stance persists even though the United States has ceased raising interest rates.

There are anticipations surrounding the ECB's announcement today regarding further reductions in the inflation rate. The inflation rate is projected to decrease to 5.3% in July, following the previous reduction to 5.5% in Core CPI, which has remained unchanged over the past several months.

Data released yesterday revealed that the Eurozone surpassed a trade surplus of 23 billion euros in June, a significant improvement compared to a trade deficit of 27.1 billion euros during the same month last year. This positive trade balance signals economic recovery. The surplus exceeded predictions, which had estimated it at 18.3 billion euros. Looking at imports, there was a decrease of 17.7% year-on-year, totaling 229.3 billion euros, with energy imports experiencing the most significant decline of 47.5%. On the other hand, exports increased by 0.3% to 252.3 billion euros, largely driven by the transportation of machinery and equipment, which saw a substantial increase of 10.7%.

The increased export activity can be attributed largely to a significant rise in production. Industrial production has increased by 0.5% month-on-month (MoM), outperforming market expectations of a 0.1% decline. This positive growth signifies a robust manufacturing sector. Alongside this, the number of employed individuals has also risen by 0.2% from the previous quarter, reaching a total of 166,700 people. The increased employment suggests a tight labor market with potential to prompt the ECB to consider further interest rate adjustments. Additionally, interest rate hikes need to be considered in relation to employment growth.

Returns on Eurozone government bonds have begun to rise after a slight dip. The one-year government bond yield has risen back to 3.59%, nearing the previous high of 3.66% observed last month. Similarly, the ten-year government bond yield has seen a parallel increase, reaching a yield of 3.44%. These rising yields indicate investor concerns about the Eurozone economy and the anticipation of further interest rate adjustments by the ECB, leading to increased bond selling activities.

Techical analysis data (5H)

Resistance: 0.9204, 0.9211, 0.9223

Support: 0.9185, 0.9173, 0.9166

Source: Investing.com