Eurozone Inflation Turns Lower Again in August

The Eurozone CPI declined by 0.2% this month

Core CPI fell to 0.4% from 0.8% in July

The Eurozone economy took a major hit during the lock-downs, due to coronavirus, as did all other economies around the globe. The Eurozone economy was already in difficulty before the covid, but during Q2 we saw a major contraction like never before.

Inflation cooled off considerably, which headline CPI (consumer price index) falling to 0.1% in May. Although, it started recovering in June and July, increasing to 0.4%. But, today’s report showed that CPI fell into negative territory this month at -0.2% for the first time in a long period. Nonetheless, EUR/USD keeps grinding higher due to the weakness in the USD.

Eurozone GDP Report Released by Eurostat – 1 September 2020

  • August preliminary CPI YoY -0.2% vs +0.2% expected
  • July CPI YoY stood at +0.4%
  • Core CPI YoY +0.4% vs +0.8% expected
  • August core CPI +1.2%

That is a considerable miss on inflation estimates and certainly isn’t an encouraging sign. The deflationary effects of the pandemic is truly being felt right now across the euro area and this is a development to watch closely in the coming months.

The ECB may still afford to wait for now before reacting but a more severe drop in price pressures and inflation expectations potentially deanchoring may prompt some form of action. If anything else, don’t expect them to be too happy with a rising euro. For now, the single currency is taking the data in stride with EUR/USD seen at 1.1970, not reacting much to the headlines.

Eurozone July Unemployment Rate

  • July unemployment rate 7.9% vs 8.0% expected
  • June unemployment rate stood at 7.8%

The jobless rate in the region ticks higher a little but again the true nature of underlying labour market conditions is still heavily masked by government furlough programs at the moment. So, it is tough to draw much conclusions from the data here for now.

ABOUT THE AUTHOR See More
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

Related Articles

Comments

0 0 votes
Article Rating
Subscribe
Notify of
0 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

HFM

Doo Prime

XM

Best Forex Brokers