Inflation data in the  euro area dropped to 1.4 percent on YoY basis in May, from 1.9 percent in April, according to fresh figures Wednesday from the European statistics office. What’s more, also the so called “core” measure was lower than expected, falling to 0.9% in April from 1.2% in March.

The decrease was mainly influenced by energy prices. Despite being the most important component driving up inflation, energy fell to 4.6 percent from 7.6 percent in April. Nonetheless for the past few readings, headline inflation has been nearing close to, but still below, the 2 percent target of the European Central Bank/

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Inflation in the eurozone slowed in April and was a negative surprise ahead of the ECB’s meeting. Doves will have a strong argument in favour of leaving the policy stance unchanged. source: XTB, Macrobond

The continuous surge in inflation and positive economic data across the bloc keep adding pressure on the ECB to start reducing its monetary stimulus. Four unnamed ECB officials told Reuters on Tuesday that the central bank is getting ready to soften its stance on monetary easing next week at a Governing Council meeting.

The meeting on June 8 is the first since the outcome of the French election and will provide an economic update to members. The reduced political uncertainty in the euro zone coupled with stronger inflation and solid economic figures could kick off the discussion on how and when the central bank should “taper”.

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 EURUSD rose despite weaker inflation in April. A new higher low may have been posted, which is a bullish sign.


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