Euro Rallies on Positive Eurozone Inflation Data, Later Declines

The euro today rallied higher against the US dollar following the release of upbeat Eurozone inflation data, which came in close to the European Central Bank‘s inflation target. The single currency was further boosted by the decision by Italian political parties to form a government instead of opting for fresh elections.
The EUR/USD currency pair today rallied to a high of 1.1724 from a low of 1.1648 gaining over 70 points, but was on a downtrend at the time of writing.
The currency pair was in a consolidative phase during the Asian session, but rallied higher after the political situation in Italy appeared to cool off. The release of the positive Eurozone CPI data for May by Eurostat early in the European session cemented the currency pair’s gains. The headline CPI print came in at an annualized 1.9%, which is just 0.1% short of the ECB inflation target of 2%; the figure also beat the consensus estimate of 1.6%. The core CPI print also did not disappoint as it was recorded at an annualized 1.1%, which was higher than the expected 1.0%. The Eurozone unemployment rate also released today came in at 8.5% versus the expected 8.4%.
The decision by Italian political parties to form a coalition government instead of going into fresh elections also calmed investor fears of an entirely eurosceptic Italian government being elected into office.
The currency pair’s short-term performance is likely to be affected by the release of US PCE data, pending home sales, and initial claims data later today.
The EUR/USD currency pair was trading at 1.1683 as at 10:21 GMT having dropped from a high of 1.1724. The EUR/JPY currency pair was trading at 127.18 having rallied from a low of 126.46.

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