The euro stabilized just above $1.17, its strongest level since September 2021, supported by broad dollar weakness amid a more dovish US Fed outlook and rising US fiscal concerns. In Europe, investors assessed a wave of inflation data from the region’s largest economies and its implications for the ECB’s policy path.
Germany’s consumer price inflation unexpectedly eased to 2.0% in June from 2.1% in May, returning to the ECB’s target for the first time since October 2024 and defying forecasts of a rise to 2.2%. In contrast, inflation in France, Italy, and Spain edged up slightly, though it remained relatively subdued. Adding to the cautious sentiment, German retail sales posted a sharp decline. Despite mixed signals, money markets continue to price the ECB’s terminal rate around 1.75%–1.80%. ECB Vice President Luis de Guindos reiterated on Monday that the current policy stance is appropriate but stressed the importance of maintaining flexibility amid lingering uncertainty.
