Eurozone core inflation is forecast to rise by 2.2%, with headline inflation expected to be 1.9% higher than last year. The European Central Bank may cut interest rates again this year as inflation is under control. Services inflation is the main driver, with food, alcohol, and tobacco contributing positively, and energy providing a negative impact.

Food and core goods prices are cooling in the eurozone due to a stronger euro and weaker commodity prices. Energy price comparisons from last year will also contain price rises. Euro area headline inflation is expected to stay below 2%, driven by falling wage growth. Services inflation is seen receding, impacting the ECB’s focus.

This week’s inflation reading could support European stocks after a trade deal boost. Investor sentiment may improve further as equity markets rally on a supportive macroeconomic environment. The European Central Bank is expected to cut interest rates again this year, with one more rate cut anticipated. The bank kept rates unchanged in July, citing an end to the inflationary phase. Further monetary policy easing could be on the horizon due to disinflationary pressures in food and imports.

Read more at Morningstar: What to Expect from July’s CPI Data