European session review: EUR appreciates, supported by better-than-expected Eurozone’s Q2 GDP reading and June unemployment rate that outweigh hotter-than-expected July CPI data

EUR strengthened against most of its major rivals in the European session on Friday, as investors digested a raft of important economic data out of the Eurozone, including Q2 GDP, June jobless rate and July CPI.

Eurostat reported its preliminary estimates showed that the Eurozone’s GDP grew 2% q/q in the second quarter, rebounding from two consecutive periods of contractions (-0.6% q/q in 4Q2020 and -0.3% q/q in 1Q2021). Economists had expected a 1.5% q/q growth. On a y/y basis, the region’s GDP recovered 13.7%, also exceeding economists’ forecast of 13.2% advance.

In a separate report, Eurostat announced that the euro area's annual inflation rate increased to 2.2% in July from 1.9% in the previous month. This was the highest reading since October of 2018 and exceeded economists’ forecast of 2%. Meanwhile, annual core inflation, which excludes energy, food, alcohol and tobacco, dropped to 0.7% this month from 0.9% in June. The rate was expected to ease to 0.8%. 

In addition, Eurostat’s estimates revealed that the region’s unemployment rate dropped to 7.7% in June from a revised 8.0% in May (originally 7.9%). This was the lowest reading since May 2020 and below economists’ forecast of 7.9%.