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Euro-zone inflation increased to record high

Euro-zone inflation increased to record high

The headline Euro-zone CPI inflation rate increased to a record high of 7.5% for April from 7.4% previously, in line with consensus forecasts, while the underlying rate increased more than expected to a series-high of 3.5% from 2.9% in March.

EU officials also continued to discuss energy policy with further pressure for an outright ban on Russian crude imports but failed to reach a consensus. The Euro was unable to hold initial gains on Monday and gradually drifted lower with strong pressure from overall yield spreads.

Reaction to the data was relatively muted with the dollar overall continuing to gain support on yield spreads and it dipped back below the 1.0500 level against the dollar. The Euro did manage to regain this level on Tuesday but remained firmly on the defensive as yield spreads underpinned the US currency.

Sterling initially pushed to highs near 1.2600 on Monday, but gradually lost ground amid the wider lack of fundamental support and a renewed slide in US equity markets.

In this environment, it dipped back below the 1.2500 level against the dollar at the European close while the Euro secured a net recovery to just above 0.8400 after sharp losses on Friday. A steadier tone surrounding risk helped limit further Sterling selling as it traded just above 1.2500 against the dollar on Tuesday.

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