The euro gave up early gains, trading at $1.17, after European inflation data suggested easing price pressures, dampening expectations of an ECB rate hike by year-end.
Germany’s inflation fell to 1.8% in December, below forecasts of 2% and under the ECB’s 2% target for the first time since September 2024, driven by softer food prices and a sharper drop in energy costs.
The EU-harmonized CPI also rose just 2%, the lowest since July and below the anticipated 2.2%.
In France, inflation missed expectations as well, with the national CPI up 0.8% and the harmonized rate 0.7%.
Money markets now see almost zero chance of an ECB rate hike by December 2026, and only about 24% probability by March 2027.
Investors are turning their attention to full Eurozone inflation results due Wednesday, after the ECB signaled last month that interest rates are likely to remain on hold amid resilient growth and inflation near target.