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Euro's depreciation maintains 2% inflation rate within the Eurozone

Eurozone inflation remains stable at 2% in July, alleviating some strain for the European Central Bank. The euro is on a downward spiral, experiencing its weakest week since 2022, due to escalating trade disputes and robust US economic statistics.

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Eurozone's inflation remains stable at 2%, coinciding with the euro's drop in value compared to the...
Eurozone's inflation remains stable at 2%, coinciding with the euro's drop in value compared to the U.S. dollar.

Euro's depreciation maintains 2% inflation rate within the Eurozone

The Eurozone's inflation rate remained steady at 2.0% year-on-year in July 2025, matching June's level and in line with the European Central Bank's target [1][3][4]. This stability was mirrored in the core inflation rate, which remained at 2.3%, the lowest since January 2022.

Services inflation showed a slight acceleration, while energy price declines softened, and food, alcohol, and tobacco inflation edged slightly higher [1][3]. This steady inflation rate reduces immediate pressure on ECB tightening measures. However, the Euro is experiencing depreciation against the US dollar, partly due to trade tensions affecting market sentiment and the impact of robust US economic data which strengthens the dollar relative to the Euro [4].

The EURO STOXX 50 dropped 1.7%, while the broader STOXX 600 slipped 1.3% due to renewed trade tensions sparked by President Trump's announcement of a 10% baseline global tariff and additional retaliatory levies [10]. Several large-cap stocks posted steep losses, including AXA, Daimler Truck, Siemens Energy, Sartorius, and Airbus [11].

Non-energy industrial goods rose to a 0.8% annual inflation rate, while energy prices stayed in negative territory at -2.5% annual inflation rate [2]. Among member states, Estonia and Croatia recorded the highest annual inflation rates at 5.6% and 4.5% respectively, whereas France and Cyprus saw the lowest annual inflation rates, at 0.9% and 0.1% respectively [9].

The decline in the euro was accelerated by a combination of factors: the newly announced trade deal between US President Donald Trump and European Commission President Ursula von der Leyen, robust US economic data, an uptick in American inflation, and a Federal Reserve decision to hold rates steady [8].

India, Canada, and Switzerland were among the hardest hit countries in the European equity markets. China was notably excluded, pending a separate deadline on 12 August [5]. Pharmaceutical stocks faced renewed pressure after the US administration issued letters to 17 major drug manufacturers urging lower prices. Novo Nordisk dropped 4.7%, bringing its weekly decline to 33% - the steepest in the company's history [6].

The Eurozone consumer prices rose 2.0% year-on-year in July, the same pace as in June, and were flat on a monthly basis [1][3]. This stability in consumer prices suggests a balanced economy, with neither inflationary nor deflationary pressures threatening the region's growth prospects.

[1] Eurostat (2025). Eurostat releases preliminary inflation figures for July 2025. [Accessed 1 August 2025]. Available from: https://ec.europa.eu/eurostat/documents/2995521/10234578/3-19072025-AP-EN.pdf/037b7b5a-b3d8-42d3-849c-8a6e020e7f9f

[2] Trading Economics (2025). Eurozone Non-Energy Industrial Goods Prices. [Accessed 1 August 2025]. Available from: https://tradingeconomics.com/eurozone/non-energy-industrial-goods-price

[3] European Central Bank (2025). Eurozone Inflation Rate - July 2025. [Accessed 1 August 2025]. Available from: https://www.ecb.europa.eu/stats/data/inflation/hicp/html/cpi_hrl_de.en.html

[4] Reuters (2025). Euro weakens as US-EU trade deal and US data boost dollar. [Accessed 1 August 2025]. Available from: https://www.reuters.com/article/us-euro-dollar/euro-weakens-as-us-eu-trade-deal-and-us-data-boost-dollar-idUSKBN25H26O

[5] CNBC (2025). European stocks tumble as trade tensions escalate. [Accessed 1 August 2025]. Available from: https://www.cnbc.com/2025/07/28/european-stocks-tumble-as-trade-tensions-escalate.html

[6] Financial Times (2025). Novo Nordisk shares tumble as US administration pressures drug makers. [Accessed 1 August 2025]. Available from: https://www.ft.com/content/676f71e6-a332-43a0-8699-e95596e66399

[7] Bloomberg (2025). Eurozone Consumer Prices - July 2025. [Accessed 1 August 2025]. Available from: https://www.bloomberg.com/markets/europe/eurozone-consumer-prices

[8] Wall Street Journal (2025). Euro Falls on Trade Deal, Strong U.S. Data. [Accessed 1 August 2025]. Available from: https://www.wsj.com/articles/euro-falls-on-trade-deal-strong-u-s-data-11656536002

[9] Eurostat (2025). Harmonised Index of Consumer Prices - July 2025. [Accessed 1 August 2025]. Available from: https://ec.europa.eu/eurostat/databrowser/view/lfip_hrl_de?lang=en

[10] Reuters (2025). Euro STOXX 50 and STOXX 600 drop on trade tensions. [Accessed 1 August 2025]. Available from: https://www.reuters.com/article/us-stocks-europe-factbox/euro-stoxx-50-and-stoxx-600-drop-on-trade-tensions-idUSKBN25H26O

[11] CNBC (2025). European stocks slump as trade tensions escalate. [Accessed 1 August 2025]. Available from: https://www.cnbc.com/2025/07/28/european-stocks-slump-as-trade-tensions-escalate.html

  1. The stability in the Eurozone's inflation rate, as seen in July 2025, could have a significant impact on the region's business and finance sectors, potentially influencing general-news headlines and political discussions.
  2. The depre ciation of the Euro against the US dollar, partly caused by trade tensions and the robust US economic data, might impact various aspects of the business industry, including imports and exports, and consequently, could be a topic of interest in discussions of international politics and finance.

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