EUR/USD slips below 1.1700 amid soft Eurozone CPI – BBH

FXStreet Insights Team FXStreet

EUR/USD is trading below 1.1700 as Eurozone December CPI data reinforces the ECB’s bias to keep rates on hold. With headline inflation at 2.0% y/y and core measures easing, the euro is expected to remain above 1.1500 in the coming months, while swaps price in steady policy, BBH FX analysts report.

December inflation supports ECB’s hold bias

"EUR/USD is trading on the defensive below 1.1700. The Eurozone preliminary December CPI supports the ECB’s on hold bias. In line with consensus, headline inflation dipped 0.1pts to 2.0% y/y, hitting the ECB’s medium-term target. Both core and services inflation also fell 0.1pts to 2.3% y/y (consensus: 2.4%) and 3.4% y/y, respectively."

"The ECB is in a good place to keep rates on hold at 2.00% for some time. That suggests EUR/USD will hold above 1.1500 over the next few months. The swaps curve price-in steady rates in the next twelve months and a 25bps rate increase to 2.25% in the next two years."

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