European session review: EUR mixed after hotter-than-expected Eurozone inflation data

EUR traded mixed against other major currencies in the European session on Tuesday, as investors digested the data, which showed inflation in the eurozone accelerated more than forecast in August, hitting a 10-year high.

The single European currency rose against USD, JPY, GBP and CAD, but declined against CHF, AUD and NZD.

Eurostat announced earlier today that its flash estimate revealed Euro area inflation rose 3.0 percent y/y in August, sharply accelerating from 2.2 percent y/y in July. This represented the highest rate since November 2011. Economists had forecast the rate to increase to 2.7 percent y/y. Meanwhile,  the core indicator, which excludes volatile energy and unprocessed food prices, jumped 1.6 percent y-o-y in August after a 0.7 percent y-o-y gain in the previous month. This was the highest reading since July 2012. Economists had expected a 1.5 percent y-o-y advance.

It is expected that today’s hotter-than-expected CPI data will put pressure on the ECB’s policymakers, when they gather on September 9 in Frankfurt to discuss the prospects of the monetary stimulus.

The accounts of the ECB’s July 21-22 meeting revealed that some policymakers thought that the central bank’s stance was underestimating the risk of higher inflation.