Eurozone inflation uptick unlikely to 'derail' future ECB rate cuts

Matthew Ryan, CFA Ebury

Yesterday’s Euro Area inflation data has somewhat muddied the water for the European Central Bank. The headline HICP measure rose back up to 2.4% in December, the highest level since July, while the core number remained stuck at a still elevated 2.7% for the fourth straight month.

We don’t think that this will derail further cuts from the Governing Council in the coming months (rate setters appear more concerned with the growth slowdown than price pressures), but it may at least trigger an element of dissent among the more hawkish faction.

Mostly second tier economic news will be released during the remainder of the week - perhaps the most noteworthy data point will be Thursday’s retail sales print, although this is for November and runs on a bit of a lag.

EUR/USD will instead continue to be driven by tariff news and Friday’s US payrolls report.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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