Spain’s Harmonised Index of Consumer Prices (HICP) fell by 0.8% month on month in January.
This was below the expected fall of 0.7% for the month.
Eurozone Disinflation Signals
This morning’s report showing Spanish consumer prices fell faster than anticipated in January reinforces our view of growing disinflationary pressure in the Eurozone. This data point directly challenges the cautiously hawkish tone the European Central Bank (ECB) adopted late in 2025. Given that the broader Eurozone inflation flash estimate for January 2026 was already hovering just below the 2% target, this weak Spanish number suggests the final reading could be even lower.
We should therefore anticipate a more dovish pivot from the ECB in the coming weeks. Traders should consider positioning for lower interest rates by buying futures contracts tied to the Euribor. This move is supported by historical precedent; we saw a similar pattern in 2014 when persistent low inflation forced the ECB into an unexpectedly aggressive easing cycle.
This growing policy divergence with the United States, where January’s job numbers continue to show economic strength and keep the Federal Reserve on hold, should put downward pressure on the euro. We believe buying put options on the EUR/USD is a prudent strategy to capitalize on this trend. The last time we saw such a clear policy split in mid-2025, the euro weakened by over 3% in the subsequent month.
For equity markets, the prospect of lower borrowing costs is a tailwind. This environment makes European stocks more attractive, and we expect to see capital flow into the region. Buying call options on broad European indices like the Euro Stoxx 50 allows for participation in this potential upside as monetary policy becomes more accommodative.
