(CTN News) – The ECB’s pressure was somewhat relieved in July as the Eurozone’s inflation rate held steady at 2%. Due to trade tensions and encouraging U.S. data, the euro is expected to have its most difficult week since 2022.

Currently, inflation in the eurozone doesn’t seem to be a major issue because it has been steady enough to give the European Central Bank (ECB) some leeway.

Consumer prices rose 2% year-on-year in July, according to preliminary data issued by Eurostat on Friday. This growth rate is in line with the June growth rate. A set rate was set for the monthly price.

The ECB’s stance after years of inflation.

Food, drink, and tobacco had the highest annual inflation rate of any of the major categories, rising from 3.1% in June to 3.3% in July.

Services were in second place at 3.1%, down from 3.3%, while non-energy industrial products rose to 0.8%. At a rate of -2.5%, the price of energy kept falling.

Despite a 0.2% drop in the monthly figure — the first negative reading since January 2025 — core inflation, which does not include volatile food and energy prices, remained stable at 2.3%.

The member countries’ annual inflation rates were as follows: France and Cyprus had the lowest rates at 0.9% and 0.1%, respectively, while Croatia and Estonia had the highest rates at 4.5% and 5.6%.

Prices increased by 1.2% each month in Croatia and significantly decreased by 1% per month in Italy.

Outlook for ECB policy: Postpone until

After a year-long easing cycle that saw borrowing prices drop eightfold to levels not seen before November 2022, the European Central Bank kept interest rates at their current levels in July.

The central bank is “in a good place,” according to President Christine Lagarde, but she also warned that a mix of inflationary and disinflationary impulses makes it hard to forecast how tariffs will affect the economy in the future.

Since policymakers are presently assessing the possible effects of the EU-US trade agreement on the pricing environment, these inflation numbers support the ECB’s current wait-and-see stance.

Is the euro under pressure from a new source?

After its first monthly fall of the year, the single currency ended the year in negative territory in July. It did, however, put in its best first-half effort since the beginning.

In the last week of the month, the euro fell 2.8% versus the US dollar, hitting a seven-week low of 1.14.

The pivotal moment came when investors concluded that Washington would benefit more from the recently announced trade deal between US President Donald Trump and European Commission President Ursula von der Leyen.

This mood, strong US economic data, rising US inflation, and the Federal Reserve’s decision to keep interest rates between 4.25 and 4.50% without signaling an impending cut all contributed to the euro’s sharp decline.

This was the biggest negative weekly performance for the currency since September 2022, when energy market turmoil caused the euro to go below parity to a low of $0.9535.

The trajectory of the euro for the rest of the year will be heavily influenced by the changing effects of trade policy and tariffs, as well as upcoming data releases, even although the situation is far less disastrous than it was three years ago.

Market reaction: As long as tariff uncertainty persists, stocks fall.

President Trump’s declaration of a 10% worldwide baseline fee and extra retaliatory duties ranging from 25% to 41% on countries without formal trade agreements sparked the escalation in trade hostilities, which put pressure on European financial markets Friday.

The countries that suffered the most were Canada, Switzerland, and India. Given that the deadline is yet August 12, China’s absence is very significant.

For example, the STOXX 600 was down 1.3% overall, and the EURO STOXX 50 was down 1.7%.

Additionally, national indexes saw declines: the French CAC 40 fell 1.8%, the German DAX fell 1.7%, and the Italian FTSE MIB fell 1.9%.

A number of large-cap stocks had significant drops. AXA had a 6% drop in net income following the issuance of a profit warning, while Daimler Truck saw a 5% reduction. Sartorius, Airbus, and Siemens Energy also reported losses of more than 3%.

Currently, the US administration’s letters to 17 major drug makers requesting lower prices are adding to the pressure on pharmaceutical stocks. The weekly decrease for Novo Nordisk was the biggest in the company’s history, falling 33% after declining 4.7%.

SOURCE: EN