Mixed numbers from the euro-zone: headline inflation remains very subdued, stuck at the multi-year low of 0.5%. However, core inflation rose from the multi-year lows of 0.7% to 0.8%. Officially, a headline CPI of 0.6% was expected but it remained at 0.5% like in May. Core CPI rose to 0.8%, beating expectations of 0.7%
EUR/USD is stable on the mixed data, moving only very marginally above the 1.3550 line. With low inflation, the ECB would certainly like to see a weaker value of the euro in orders to push import prices higher and to make exports more competitive.
After the relatively strong inflation data from Germany, there were expectations for some kind of pickup in inflation, but this remains quite limited, to say the least. However, Italy reported an HICP flash CPI of 0.2%, below 0.4% expected. Earlier, Spain also reported weak inflation data.
The ECB set a historic negative deposit rate back in June, and also announced a long list of measures. However, it also closed the door on further cuts by tweaking its forward guidance and only pledging for “low interest rates†instead of “low or lower†ones.
These inflation numbers do not change the picture regarding the actual decision on Thursday: Mario Draghi and his colleagues are not expected to act just one month after the long list of steps they took.
However, Draghi could still deny the danger of deflation while trying to talk down the euro. He might get some back wind by the change of flows: after long months of inflows into European bonds and stocks, the tides have turned and this could eventually weigh on the euro.
For more:Â Where is the fall of EUR/USD?
