European session review: EUR mixed after Eurozone's data on manufacturing activity, inflation

EUR traded mixed against its major rivals in the European session on Tuesday after the data showed that the Eurozone's manufacturing sector saw a new record improvement in operating conditions during May, while the region’s consumer price inflation hit the European Central Bank's (ECB) "just-below-2%-target"  for the first time since 2018.

IHS Markit reported its Eurozone Manufacturing PMI was revised to 63.1 in May, up from a preliminary of 62.8 and above 62.9 in April. The reading pointed to fresh record growth in factory activity. 

According to Eurostat's preliminary estimate, the euro area annual inflation rate accelerated to 2.0 percent last month from 1.6 percent in April.  This was the highest reading since October 2018 and topped the ECB’s preferred target of "just below 2%" and economists' forecast of 1.9 percent. 

Despite a spike in consumer prices in May, market participants do not expect it will cause a change in the ECB's monetary policy next week. The ECB's policymakers have continued to say that a surge in inflation is expected due to base effects and temporary factors and that CPI may even exceed the bank's target by the end of the year.