Euro area’s headline inflation likely to have slowed marginally in July

There have been certain signs lately that the euro area’s economic activity is beginning to rebound after a subdued beginning to the year. The August Eurozone PMIs report released this week indicated a modest growth in the composite indicator. According to a Lloyds Bank research report, the German IFO survey is expected to have continued this theme in both the current situation and future expectations readings.

“Though this leaves its level below that of late last year, the European Central Bank seems to regard the pace of growth at that time as unsustainably rapid, so the ECB is likely to be comfortable with some moderation”, stated Lloyds Bank.

In the meantime, July’s headline inflation is likely to have decelerated in year-on-year terms to 2 percent from 2.1 percent previously, while the ‘core’ rate is expected to have stayed the same at 1.1 percent. The latter indicates that inflation is still some way from returning to the ECB’s inflation target on a sustained basis, said Lloyds Bank.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bullish at 105.164, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -24.5655. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex