Eurozone Prelim HICP rises moderately by 2% in December, as expected

💡 DMK Insight

The Eurozone’s HICP inflation ticking down to 2% is a mixed bag for traders right now. While it aligns with expectations, the slowdown from 2.1% in November suggests that inflationary pressures are easing, which could impact the European Central Bank’s (ECB) monetary policy decisions. If inflation continues to trend lower, it might lead to a more dovish stance from the ECB, affecting the euro’s strength against other currencies. Traders should keep an eye on how this data influences the euro, especially against the USD and GBP. Watch for key support levels around 1.05 for EUR/USD; a break below could signal further weakness. Conversely, if inflation surprises to the upside in upcoming reports, it could lead to renewed hawkish sentiment, pushing the euro higher. Here’s the thing: while the headline number looks stable, the underlying trends matter more. If inflation remains subdued, it could signal a shift in market sentiment, particularly for interest rate expectations. Keep an eye on upcoming economic indicators and ECB communications for clues on future moves.