On the macro front, the focus today was on the preliminary June inflation data in the euro area. According to Eurostat, consumer price index (CPI) slowed to 5.5% in June 2023, from 6.1% the prior month. The headline rate was slightly below market forecasts of 5.6% and the lowest since January 2022. On the other hand, core CPI increased to 5.4% in June 2023, but slightly below market forecasts of 5.5%.
Inflation in the euro area is still well above the ECB’s 2% target. So far, the central bank has raised its three key interest rates eight consecutive times. Its tightening policy has brought the rate on the main refinancing operations, the deposit facility and the marginal lending facility to 4.00%, 3.50% and 4.25%, respectively. Another rate hike is highly likely in July, even though the euro area entered a technical recession in the first quarter of 2023, as the economy contracted for two consecutive quarters. On Tuesday, President Lagarde said during her speech in Sintra that inflation in the euro area is still too high and that the central bank won’t be able to declare rate peak in the near future. All eyes will be on the next ECB meeting in July.