European Markets Edge Lower Ahead of Key Inflation Data

European equities slipped on Friday as traders positioned cautiously before the release of crucial inflation figures from the eurozone and the United States, data that could determine the timing of interest rate cuts.

The region-wide STOXX 600 index fell 0.4%, on track for its first weekly loss in nearly a month. Banking shares were among the weakest performers, with NatWest tumbling almost 5%, Barclays down more than 3%, and Lloyds losing close to 4%. The pullback came after renewed debate in Britain about whether banks should face higher taxes on interest earnings tied to the Bank of England’s policy rates.

Political uncertainty in France also weighed on sentiment, with the CAC 40 dropping for a third straight week, leaving it down over 3% in August. Broader market caution reflected investor focus on consumer price data from Germany and France due later in the day, followed by U.S. inflation numbers.

Analysts said the reports could be pivotal in shaping expectations for rate cuts on both sides of the Atlantic. Until then, many investors are avoiding large bets, keeping turnover relatively muted across European trading floors.