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EUR Reverses Overnight Dip on Double Digit Spanish CPI

  • Spanish inflation prompted some early price action across European assets, with the EU harmonised reading lurching higher to 10.0% from 8.5% and another record high. The release prompted EUR/USD to erase the early losses to trade just above the 1.05 handle once more, but stopping short of the 1.0536 Asia session highs.
  • In contrast, German state CPIs suggest a lower-than-expected reading later today, with states representing a majority weight of the national measure putting M/M at around 0.0-0.1%, well below the 0.4% M/M consensus. The earlier release of North Rhine Westphalia data had prompted some downside in the EUR, but the Spanish release reversed the bulk of the move.
  • EUR/CHF is narrowing in on both parity and the YTD lows posted in March, with 0.9972 the key support going forward. CHF strength follows the continued baking-in of rate hike expectations at the SNB, with SARON markets indicating expectations of further 50bps rate rises at both the September and December policy meetings. This would put year-end rates at +0.75%.
  • AUD/USD is extending the recent streak of underperformance, putting the pair lower for a third consecutive session and within range of key supports at 0.6869 and 0.6851.
  • US GDP and PCE data out later today will likely fail to move the needle, with the tertiary reading expected unchanged across the board. Instead, focus will be on the ECB's Sintra policy forum, at which ECB's Lagarde, BoE's Bailey and Fed's Powell are all due to appear. Fed's Bullard and Mester also make separate appearances.
MNI London Bureau | +44 203-865-3809 |
MNI London Bureau | +44 203-865-3809 |

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