FOREX-Euro trims declines after Spain inflation surge

·2 min read

By Joice Alves

LONDON, June 29 (Reuters) - The euro edged lower on Wednesday following release of conflicting inflation data in Germany and Spain that created a difficult backdrop for European Central Bank policymaking.

The euro fell to a six-day low in early London trading after data showed June prices in the German state of North Rhine–Westphalia (NRW) had been 0.1% lower than in May.

But the euro trimmed those losses, flattening on the day after data showed Spanish 12-month inflation had risen to 10.2% in June, up from 8.7% in May and surpassing 10% for the first time since April 1985.

"The -0.1% drop in Germany's NRW June CPI number has caused the market to question the hawkishness of the ECB going forward," said Jane Foley, head of FX strategy at Rabobank in London.

But later the strength of Spanish CPI inflation data had undone the downward pressure on the euro and presented the ECB with even more complications in setting policy, she added.

Investors will be watching national inflation data for Germany due on Wednesday as well as a panel at the ECB Forum in Sintra, Portugal, with three major central bankers speaking.

ECB President Christine Lagarde, Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey will speak at 1300 GMT.

On Tuesday, Lagarde offered no fresh insight on the path for European interest rates at the ECB's annual forum.

The ECB is widely expected to raise interest rates in July for the first time in a decade, following its global peers, to try to cool accelerating inflation, though economists are divided on the magnitude of any hike.

The euro was down 0.08% to $1.0513 at 0828 GMT after dipping as low as $1.0486 earlier.

Meanwhile, the dollar edged higher, with investors seeking safety in U.S. assets as stocks declined globally due to the mounting risk of a recession.

The safe-haven dollar index, which measures the greenback against six counterparts, ticked up 0.06% to 104.5, but stayed below a two-decade high struck two weeks ago.

European equities slid, following heavy Wall Street losses on Tuesday after a steep drop in U.S. consumer confidence stoked worries about an economic slowdown at a time when the U.S. Fed is rushing to raise interest rates to bring inflation under control.

(Reporting by Joice Alves and Kevin Buckland; Editing by Bradley Perrett)

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