Latest data released by Eurostat - 1 September 2020
- Prior +0.4%
- Core CPI +0.4% vs +0.8% y/y expected
- Prior +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.