Germany's inflation rate edged closer to the European Central Bank's preferred target this month, data from the country's statistics office indicated Thursday, suggesting the region's largest economy will continue to power growth into the second half of the year.
Consumer prices accelerated at a stronger-than-expected 1.5% clip in June, Destatis said, up from an annual rate of 1.4% in May and just shy of the ECB's 'close to but below 2%' target for the whole of the currency area economy.
The data comes amid what appears to be a global repricing of inflation risks, and central bank policy intentions, following a series of signals from various rate-setters over the past week, including Federal Reserve Chair Janet Yellen, ECB President Mario Draghi and Bank of England Governor Mark Carney.
The euro, which has surged past a one-year high against the U.S. dollar, extended gains immediately following the data release to trade at 1.1409 against the greenback.
Germany's benchmark borrowing costs rose the highest level in three months as 10-year bunds were marked 8 basis points higher at 0.45% by 3:00 pm Frankfurt time as investors re-priced inflation risks in both the region's biggest economy and the broader Eurozone. Germany's 2-year government bonds, known as schatz, traded at -0.56%, the highest level in more than a year.
The Stoxx 600 Europe Banks index, the broadest measure of financial sector shares, gained 1.88% to 186.52 in London, the highest in more than a month, as the euro continued to trade past its one-year high against the U.S. dollar following a bullish speech from Draghi earlier this week that many traders interpreted as a signal for near-term policy tightening.
The pound also continues to trade at multi-week highs against the greenback after Wednesday's speech from Bank of England Governor Mark Carney referenced the removal of stimulus if U.K. growth were to surprise on the upside.
The change in tone, while not seemingly coordinated, nonetheless suggests a shift away from the 'near zero' interest rate strategies and extraordinary stimulus efforts put in place during the global financial crisis nearly a decade ago as economies recover and inflation slowly begins to accelerate.
The gains for both the pound and the euro helped push the U.S. dollar index to a nine-month low of 95.90 as investors bailed out of the greenback in search of both yield and diversification.