Consumer prices in the euro area fell to 0.2% YoY, the lowest reading since April 2016 and noticeably weaker than the expected 0.2% YoY growth. In June and July, we saw a price spike caused by lockdowns, but it was not sustainable. The failure of the economy and the easing of restrictions brought back the main deflationary processes.
Classically, low inflation is a reflection of weak demand and cements expectations of easing monetary policy. However, it is worth noting that recently we saw inflation drop along with the rise of EURUSD. Eventually, it may lead to even harder deflation pressure.
In the case of Europe, investors see low inflation as a way to preserve the value of capital, which creates negative bond rates in several European countries. Earlier today EURUSD touched levels above 1.2000, testing 2-year highs despite low inflation, potentially paving the way for a more dovish ECB tone.
The FxPro Analyst Team
- Adobe reversed from support zone - Likely to rise to resistance level 500.00 Adobe…
- EURJPY reversed from support zone - Likely to rise to resistance level 0.8625 EURGBP…
USDJPY was slipping below 153 on Friday morning, a three-week low and having lost over…
Market picture Crypto market capitalisation rose 3.3% in 24 hours to $2.22 trillion. Local capitalisation…
- EURJPY under strong bearish pressure - Likely to fall to support level 163.10 EURJPY…
- WTI broke round support level 80.00 - Likely to fall to support level 76.00…
This website uses cookies