Eurozone inflation skyrockets

Key Movers

The US dollar remains under continued pressure, as it fell once more against most of its major rivals during yesterday's session. The dollar index – which measures the US dollar against a basket of its major rivals – fell 0.3% across the day yesterday and has dropped by 1.5% across May, yet it still remains up 6% for the year. The fall in the dollar is in part due to the more upbeat market mood. This was triggered by China announcing that they would begin to lift their COVID-19 related restrictions this week as planned – after over one month in a lockdown. The better market mood means that investors are flocking towards riskier assets and currencies, weighing heavy on the US dollar.

German price pressures were revealed yesterday and hit a multi decade high. Annual inflation topped out at 7.9% while the monthly inflation reading came in at 0.9%, with both figures beating expectation. These latest inflation figures will cause the ECB further problems in regard to their response to dealing with inflation via higher interest rates while attempting to leave monetary policy loose enough to allow further growth within the economy. All in all, EUR/USD is back to the levels it was at around 5 weeks ago, currently hovering around the 1.0750 mark. This has been caused in part by a weaker dollar and a stronger euro, which has posted gains of around 2.2% through the month of May – its biggest monthly rise in a year.