Euro above parity, dropped to 1.00005 on July 12
U.S. CPI expected to hit 8.8

LONDON, July 13 Reuters The euro was hovering just above parity with the U.S. dollar on Wednesday while traders focused on U.S. data due later in the session that is expected to show inflation at a 40year high.

European stock markets were in the red and currency markets were calm in early European trading, with the dollar index up by around 0.1 at 108.33 .

The euro was down 0.2 on the day at 1.00375 at 0804 GMT.

On Tuesday, it had dropped as low as 1.00005 on the most widely used Electronic Broking Services39; EBS dealing platform and touched 1 on Reuters dealing overnight.

Marketwatchers were focused on U.S. CPI data due later in the session. Economists forecast headline U.S. inflation accelerated to 8.8 yearonyear in June, a fourdecade high.

But core CPI, which strips away volatile food and energy prices, is expected to repeat May39;s 0.6 monthly increase and cool slightly to 5.7 yearonyear.

Higherthanforecast inflation would reinforce expectations of Federal Reserve interest rate hikes and push the dollar higher potentially causing eurodollar to break parity, analysts said.

But traders will be looking for any signs of inflation having peaked, as this could potentially convince the U.S. central bank not to become more aggressive in its future rate hikes. 

The euro is down nearly 12 this year and fell to a 20year low on Tuesday, as the war in Ukraine has triggered an energy crisis…