Eurozone witnesses slight increase in prices as unemployment falls

Posted August 01, 2017

This rate was above expectations of a 1.1% rate for the month and underlying inflation also increased from 0.9% previous year with a gradual move higher over the past few months.

The single currency is the best performer in the G10 FX universe and has gained more than 11 percent against the dollar this year with the bulk of the gains coming in the last three months.

On a year-on-year basis, the seasonally adjusted GDP rose by 2.1 percent in the eurozone and by 2.2 percent in the EU28 in the second quarter, said the EU's statistical office.

Other data last week showed that, within the eurozone, France's GDP expanded by 0.5 per cent in the second quarter and Spain's by 0.8 per cent. The single currency has rallied 14.5% against the United States dollar from its January low of $1.0339, which was a 14-year trough. The ECB has so far moved very cautiously in toning down its easing bias, refusing to drop its pledge to increase the size of its asset purchases if needed in its forward guidance at the July policy meeting.

The figures come a week after the International Monetary Fund said the eurozone economic recovery was broad and strengthening, but warned that low inflation, fragile banks and Britain's exit from the European Union remained significant risks.

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On current estimates, European earnings are expected to grow 12.4 percent in 2017, according to Thomson Reuters I/B/E/S.

The agency figures showed unemployment across the bloc dropping to a nine-year low of 9.1 percent during the period.

"The global economy has been a jumbo jet running on just one engine for the last five, six years, the USA, but now it seems there's more from the euro zone as well, with encouraging signs from Asia too", said James Knightley, chief worldwide economist at ING.

The data came a day after figures showing that headline inflation in the euro zone rose in line with forecasts in July, but underlying inflation rose to the highest in four years. Earlier in the session, the latest core inflation data out of the Eurozone also surprised to the upside.