How low can euro-zone inflation go? Lower – a new low of 0.4% is recorded in euro-zone inflation – the lowest since 2009. Will the ECB react to this news or will it prefer to say that more time is needed for its measures to be felt in the markets? It is clearly missing its target.
Core inflation remains unchanged at 0.8%. Eurostat was expected to report an annual inflation level of 0.5% in July and core inflation of 0.8%, the same in May. However, German inflation dropped from 1% to 0.8% and Spanish inflation fell to -0.3%, below expectations.
EUR/USD traded at 1.3393 just before the publication. EUR/USD is falling, albeit gently.
More data:
- Good news comes from the unemployment rate, which dropped to 11.5%, better than 11.6% expected.
- At the same time, Italy reported an inflation rate of 0.1% year over year, below +0.3% expected. HICP stands at 0%, worse than 0.2% expected.
Earlier, German unemployment fell by 12K, and this was encouraging. However, the ECB is focused on inflation and not on unemployment (which is high enough) and can certainly remain worried.
Apparently the drop in the value of the euro was not enough to lift EZÂ inflation.
With this kind of inflation, EUR/USD will probably struggle to recapture 1.34. Support is found at 1.3365, followed by 1.3325 and 1.3295.
For more, see the euro dollar forecast.
