Inflation
rates in the euro area unexpectedly rose during the month of June, while core
inflation levels fell again, which prompted the euro to decline and expand its
losses during today's trading session.
The
consumer price index in the euro area increased by 0.3% during the month of
June, after recording the lowest level in four years at 0.1% in May, while
expectations were for a decrease of 0.1%.
On
the other hand, the annual core CPI continued to decline to record 0.8%, in
line with expectations, and the previous reading was 0.9%.
The
improvement in the CPI was underpinned by increases in household spending on
food and beverages, which outweighed the decline in energy prices.
The
European Central Bank targets inflation at 2%, but it has failed to reach this
target for seven years, and inflation is expected to remain weak at least until
2022 because of the stagnation caused by the Corona virus.
The
expectations of the European Central Bank indicate that inflation could remain
at zero or close to zero for the rest of 2020 and rise only in the second
quarter of 2021.
Policymakers
had hoped that massive government wage subsidies would help reduce household
income losses, in addition to a mitigating monetary policy that aims to limit the
damage to the economy and bolster confidence to prevent a serious downturn.
The euro plunged
versus the U.S. dollar to record the lowest level in two days at 1.1197 after
it opened trading today at 1.1234. This comes after the gains recorded by the
European single currency yesterday, as it soared to a high of 1.1286.