Eurozone inflation came in firmer than expected in July, with headline CPI holding at 2.0% yoy, defying forecasts for a slight dip. Core CPI was steady at 2.3%, as anticipated. The data supports the view that the ECB may already be done cutting rates this year, with markets increasingly convinced that further easing will require a significant downside surprise.
More on ECB CPI steady at 2% in July, reinforces case for ECB pause through rest of 2025.
At the same time, Eurozone PMI Manufacturing was finalized at 49.8, up from June’s 49.5 and marking a 36-month high. While still technically in contraction, momentum is clearly improving. According to Hamburg Commercial Bank, smaller economies like Spain and the Netherlands are leading the way, while recessionary signals are fading in larger countries like Germany and France. The new US–EU trade agreement is also expected to ease business uncertainty moving forward.
In the UK, Manufacturing PMI was finalized at 48.0 in July, a six-month high. Output neared stabilization, and future expectations rose to their strongest level since February. While the sector remains in mild contraction, the tone has shifted toward cautious optimism.
