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Inflation data is back on the menu but in all likelihood, it won’t do much to change the ECB outlook. As things stand, the central bank is left hanging with markets also not anticipating any interest rate moves for the year. Amid stagflation risks that could crop up, particularly in Germany, policymakers are staying vigilant and watchful awaiting the next trend in economic developments.So for now, the inflation trend holding as it is will do little to compel the ECB to really get off their seats and take any form of action.The French report later is estimated to see headline annual inflation keep as it is in November, at 0.9%. Core annual inflation for November was seen at 1.0%, nudging down from 1.2% in October. So, this spot is one of the softer side so to speak when it comes to the inflation narrative in the euro area.But just take note that when we get to the January 2026 readings next month, INSEE will be changing the reference year to the consumer price index i.e. rebasing. The base year will turn to 2025, so that could result in the annual inflation readings being a little lower even if prices have been rising steadily. Just keep that in mind.As for the German report later, the estimates point to a cooling in headline annual inflation. The expectation is for a 2.1% reading, down from 2.3% in November. But again, the core annual inflation estimate is the more important detail to look out for. And that stood at 2.7% in November, just a little down from 2.8% in October. It’s still on the higher side though, keeping stubborn above the 2% threshold.Here’s the agenda for today for the German state CPI releases:0930 GMT – North Rhine Westphalia0900 GMT – Brandenburg0900 GMT – Hesse0900 GMT – Bavaria0900 GMT – Saxony1300 GMT – Germany national preliminary figuresDo note that the releases don’t exactly follow the schedule at times and may be released a little earlier or later.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
Inflation data’s return is a big deal, but it likely won’t shake the ECB’s stance. With the market not expecting any interest rate changes this year, traders should keep an eye on stagflation risks. This could lead to increased volatility in the eurozone, especially if inflation persists without growth. If inflation data comes in higher than expected, it might force the ECB to reconsider its position, impacting euro pairs significantly. Watch for key levels in EUR/USD; a break below recent support could trigger further selling pressure. Conversely, if inflation cools, it might provide a temporary boost to the euro as traders reassess the ECB’s dovish outlook. The real story is how this data could ripple through related assets, like European equities and bonds, which are already sensitive to interest rate expectations. Keep your charts handy and monitor the inflation figures closely, as they could dictate short-term trading strategies across the board.
📮 Takeaway
Watch for inflation data impacts on EUR/USD; a break below support could signal further downside, while stronger inflation might force a reevaluation of ECB policy.
