European markets open mixed ahead of EU inflation numbers

The European markets are expected to open mixed following yesterday's late US sell-off, while Tuesday's focus will be on the EU CPI after UK unemployment and wages figures came better than expected.

In March, the UK's unemployment rate fell to its lowest level since 1974, dropping to 3.7%. In April, the figure edged up a bit to 3.8%. It remained at this level in today's May numbers, with the Office for National Statistics commenting that there were fewer unemployed people than job vacancies during that period.

It would appear that this tightness in the labour market isn't reflected in the upward pressure on wages, as average weekly earnings, including bonuses, rose by 6.8% in April, down from 7% in March, indicating that wages aren't being pushed up. As part of the May numbers released this morning, this index dropped even further to 6.2% from its April level.

Dollar index pauses rally

It would appear that the pound is getting some relief from a pretty strong labour market, as sterling is rising for the third consecutive day towards 1.20 in the near term. 

Additionally, a large part of the GBP gains can be attributed to the flat dollar index, which hovers around 107.40. Additionally, the euro price has recovered for the third day in a row after falling as low as 0.9952 on Thursday. 

Events of today

Later in the session, the final reading of the June Eurozone CPI will be released. It is expected that the CPI will confirm that inflation has risen by 0.8% monthly.

With the ECB expected to raise rates by 0.25% later this week, the EU June CPI is expected to reach a new record high of 8.6%, which is still well below the rate that many countries in the EU are experiencing now.

If other conditions existed, headline rates in the EU would have been much higher than they are. That is because inflation is significant north of 10% in many countries across Europe, and it is as high as 22% in Estonia. A more encouraging note is that core CPI is forecast to come in at 3.7% this month after slipping in the previous month.

In the US, investors will be watching the housing data with the highlight of building permits for June, which is expected to be down for the fourth straight month, falling to 1.650M.