EUR/USD falls flat ahead of US trading session after inflationary European data

January 7, 2025

LONDON (January 7) The Euro (EUR) is attempting to still head higher against the US Dollar (USD) on Tuesday despite an earlier up move this Tuesday morning, after inflation numbers for the Eurozone as a whole revealed that disinflation has ended for now. Earlier expectations got already revised after the preliminary German Harmonized Index of Consumer Prices (HICP) data for December, released on Monday, showed that the monthly headline HIPC inflation jumped by 0.7%, above the 0.5% estimate. On a yearly basis, headline HICP rose by 2.9%, compared to 2.4% in November.

Meanwhile, markets are on edge over the whipsaw reactions and knee-jerk moves over the tariff plans from President-elect Donald Trump. The Washington Post published a piece mentioning that Trump was considering simplifying his tariff schemes by imposing a single universal tariff on critical imports and goods. Hours later, Trump himself came out to refute the rumors and confirm that the schemes and plans would remain in place as earlier announced. 

Daily digest market movers: ECB to stick to cuts

  • The French preliminary HICP for December has already been released earlier on Tuesday. The monthly gauge snapped the previous disinflationary print by jumping 0.2%, below the 0.4% expectation and above the -0.1% from November. The yearly gauge came in at 1.8%, which is 0.1% higher than the 1.7% from November. 
  • The preliminary Eurozone HICP for December has been released. 
    • The monthly headline HICP jumped to 0.4%, snapping the disinflationary -0.3% from the month before.
    • The yearly headline HICP came in at 2.4% as expected, against the 2.2% from November.
    • The monthly core HICP rallied to 0.5%, beating the -0.6% from November.
    • The yearly core HICP came a touch higher than expected at 2.8% against 2.7% consensus view and the previous reading.
    • For now, the European Central Bank (ECB) is projected to cut its policy rate by 25 basis points on January 30. 
  • Italian inflation saw a similar pattern is seen as in Germany, with the preliminary December monthly HICP heading to 0.1% from -0.1%.
  • German Bunds ticked up quite a bit last week and stretched up to 2.47% on Monday. This Tuesday, rates are starting to ease, with the Bund currently trading around 2.45%.
  • European equities are having a change of heart after the European inflation data, and are heading into green numbers. 

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