The Euro (EUR) remains under pressure against the US Dollar (USD) following the release of mixed Eurozone Consumer Price Index (CPI) data and expectations of a fully priced 25 basis point European Central Bank (ECB) rate hike, according to Brown Brothers Harriman’s Elias Haddad [1]. The May Eurozone headline CPI matched consensus at 3.2% year-over-year, up from 3.0% in April, aligning closely with the ECB’s Q2 baseline forecast of 3.1% [1]. However, core CPI exceeded expectations, rising to 2.5% year-over-year (consensus: 2.4%) from 2.2% in April, which is nearer to the ECB’s severe scenario projection of 2.4% [1].
A notable concern is the surge in services CPI, which reached a seven-month high at 3.5% year-over-year, signaling the risk of persistent inflationary pressures [1]. Despite the ECB rate hike being fully priced in, the Euro’s reaction to the CPI data was muted, reflecting ongoing market uncertainty [1]. Haddad notes that rate hikes in an environment of sluggish growth and high inflation are not supportive for the Euro, but they may help limit further downside [1].
Looking ahead, Haddad expects EUR/USD to find a bottom around the 1.1400 level, citing the stronger US growth outlook compared to the Eurozone as a key factor supporting this view [1]. No specific market reactions or analyst opinions beyond these forecasts are mentioned in the article.
CONCLUSION
Mixed Eurozone inflation data and a fully priced ECB rate hike have kept the Euro under pressure, though downside appears cushioned near 1.1400 against the US Dollar. Persistent inflation, especially in services, remains a concern, while the stronger US growth outlook continues to weigh on the EUR/USD pair.