May 3, 2018 / 9:24 AM / 3 months ago

Euro trims gains, bond yields fall after euro zone inflation slips

LONDON, May 3 (Reuters) - The euro trimmed its gains versus the dollar and euro zone government bond yields fell back on Thursday after official data showed April inflation in the region unexpectedly slipping.

The euro fell back from $1.1986 to $1.1972 after the data was released, though it was still up 0.2 percent on the day.

Inflation slipped to 1.2 percent in April, according to the Eurostat flash estimate, when economists polled by Reuters had expected it to be unchnaged from 1.3 percent in March.

Inflation after stripping out energy, food, alcohol and tobacco — one of the measures of what is referred to as “core inflation” — fell even more dramatically to 0.7 percent from 1 percent the month before.

The yield on Germany’s 10-year government Bund, the benchmark for the bloc, hit the day’s low at 0.568 percent.

“It’s certainly going to make for an interesting discussion at the ECB governing council,” said Michael Hewson, chief market analyst at CMC Markets, in the Reuters Global Markets Forum. “Rate rise expectations will be pushed back and 2019 is now very unlikely....EURUSD should move lower from here. $1.1780 is what I am looking for initially.” (Reporting by Tommy Reggiori Wilkes, Fanny Potkin and Kirsten Donovan; Editing by Abhinav Ramnarayan)

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