The euro continued to strengthen and surpassed the $1.10 level, reaching its highest point since May 8. Investors believe that the European Central Bank has more work to do in order to address inflationary pressures in the Eurozone, despite data indicating a slowdown in economic growth and easing inflation across the region. In June, Germany’s inflation rate was confirmed at 6.4%, breaking the trend of a steady decline observed since the beginning of the year, due to a low base effect last year. Meanwhile, in the broader Eurozone, inflation has decreased to a 17-month low of 5.5%. However, core indicators remain consistently elevated, surpassing the ECB’s target of 2%. Presently, interest rates in the bloc stand at 3.5%, but pricing in derivatives markets suggests that traders anticipate them to rise to a peak of 4% or higher by early next year.
