The inflation data will reinforce ECB fears over inflation trends, but there will still be additional pressure for the bank to resist an interest rate hike.

The dollar was unable to strengthen back through the 1.57 level on Friday and weakened to test support levels around 1.5780 as US equity markets remained fragile and the US economic data again failed to have a major impact.

The Euro-zone data remained generally weak with a further small decline in consumer confidence for the month while there was a bigger than expected decline in business sentiment to 0.14 in June from 0.58 the previous month. The data will reinforce expectations of a sharp slowdown in the economy and increase pressure for the ECB to hold back on an interest rate increase.

The central bank will want to maintain a tough stance, especially as inflation fears have also increased, but pressure for a hike to be abandoned will grow if equity markets continue to weaken this week. The dollar was still on the defensive on Monday at close to the 1.58 level with caution given the risk of choppy trading at the end of the first half. Subsequently, the dollar weakened to 1.5825 and the preliminary Euro-zone CPI data for June recorded an increase to 4.0% from 3.7% previously.