German inflation, US core PCE higher than expected, euro edges lower

[Ben Graham]

The euro is slightly lower on Friday. In the North American session, EUR/USD is trading at 1.1657, down 0.21% on the day.

German CPI accelerates to 2.1%

Germany has released the preliminary inflation report for July, with a hotter-than expected reading.

Annually, EU-harmonised CPI rose to 2.1%, up from 1.8% in June and above the market estimate of 2.0%. The figure was the highest level since March, driven by higher food prices.

Monthly, inflation eased to 0.1%, below the June reading of 0.4% and just above the market estimate of 0%.

Headline inflation in Germany, the eurozone's biggest economy, is largely in check but the battle against inflation is not over. Services inflation remained at 3.1% and core CPI was unchanged at 2.7%.

Policymakers at the European Central Bank won't be losing sleep over the slight gain in inflation. The eurozone releases July inflation next week, with CPI expected to nudge higher to 2.1% from 2.0% and core CPI to 2.4% from 2.3%. The ECB meets next on September 11 and is expected to maintain its key deposit rate at 2.0%.

US Core PCE rises to 2.9%

The US wrapped up the week with the Core PCE index, the Federal Reserve's preferred gauge for underlying inflation. In July, core PCE rose by 2.9%, up from 2.8% in June and in line with the consensus. It was the highest level in five months and a reminder that although inflation is largely under control, the fight is not over. Monthly, core PCE was unchanged at 0.3%.

Fed Governor Christopher Waller, who is a candidate to replace Jerome Powell as Fed Chair next year, gave a hawkish speech on Thursday. Waller said he supported a rate cut in September and hinted at support for larger cuts if the labor market continued to soften.

EUR/USD Technical

• EUR/USD has pushed below support at 1.1678 and is testing 1.1664. Below, there is support at 1.1646
• 1.1696 and 1.1710 are the next resistance lines

EURUSD 4-Hour Chart, August 29, 2025

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