FX.co ★ Euro Slides as Inflation Eases and Dollar Strengthens

The euro slipped below $1.14, nearing a one-year low after losing 2% against the US dollar in June. The move came as investors reacted to weaker-than-expected Eurozone inflation data: the flash CPI showed headline inflation easing to 2.8% in June, while core inflation fell to 2.4%, providing some relief for European Central Bank policymakers.

Speaking at the ECB’s Sintra Forum, President Christine Lagarde said that risks to both inflation and growth in the euro area have become less pronounced. Her comments mark a shift from just three weeks earlier, when the ECB became the first G7 central bank to raise interest rates following the outbreak of the Iran war, citing concerns that inflationary pressures were spreading through the economy.

Since then, the US–Iran peace accord has driven a sharp decline in oil prices, removing a major source of inflation pressure. At the same time, the US dollar remains underpinned by expectations that the Federal Reserve will raise interest rates later this year.