Eurozone CPI Preview: inflation in focus as ECB maintains cautious stance

The Eurozone’s preliminary Consumer Price Index (CPI) reading for June is set to be published Tuesday morning. Expectations point to a modest uptick in headline inflation from 1.9% to 2.0% year-on-year, with core inflation anticipated to remain steady at 2.3%. While these year-on-year figures are closely watched, the real story may lie in the monthly data. Last month, both headline and core inflation came in at 0.0% month-on-month—suggesting that price pressures across the eurozone had stalled. Although these readings take time to reflect in annual averages, they raise important questions about the trajectory of inflation in the region. In fact, Germany’s inflation figures, released on Monday, confirmed this trend, with both monthly readings coming in at 0.0%. On a year-over-year basis both headline and core CPI came in below expectations.

Despite the euro's recent strength—underpinned by a weaker U.S. dollar and broader macro trends—the upcoming CPI release is unlikely to prompt significant shifts in European Central Bank (ECB) policy. Having already implemented 200 basis points of rate cuts over the past year, the ECB is currently in a “pause and observe” phase. Markets are pricing in an 89% probability that the central bank will keep rates unchanged at its July 24 meeting. Even a downside surprise in today’s data is unlikely to push the ECB toward further immediate easing, given lingering risks around energy prices and trade tensions. Conversely, a stronger-than-expected print would likely dampen expectations for additional cuts but not revive talk of hikes.

With EUR/USD nearing the 1.18 handle and structural trends like de-dollarization continuing to support the single currency, traders will be watching closely to see if a resilient CPI print adds fuel to the euro’s momentum.

EUR/USD daily chart

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