The Eurozone flash Harmonized Index of Consumer Prices (HICP) increased at a 2% annual pace in December, a slight decrease from November’s 2.1%. Monthly inflation rose by 0.2% after a 0.3% decrease in the previous month.<\/p>\n
Core HICP, excluding food, energy, alcohol, and tobacco, experienced a slower 2.3% annual growth compared to last month’s 2.4%. For December, core HICP increased by 0.3% month-on-month.<\/p>\n
EUR\/USD saw a rise to near 1.1690 following the data release. Euro showed strength against major currencies, notably against the Canadian Dollar.<\/p>\n
December\u2019s preliminary Eurozone HICP data would be released by Eurostat later. The expected annual Eurozone HICP inflation is 2.0%, easing from November’s 2.1%, while core inflation is anticipated to stay at 2.4%.<\/p>\n
The EUR\/USD pair’s performance could respond if stronger Eurozone HICP data surfaces. Despite this potential, the pair remains subdued, influenced by Germany’s November Retail Sales increase of 1.1% YoY and monthly sales decline of 0.6%.<\/p>\n
The US Dollar’s rebound continues to impact the EUR\/USD pair, which trades around 1.1680. Technical analysis points to potential bearish bias, with the pair below the 50-day EMA, indicating possible further downward pressure.<\/p>\n
The December inflation data confirms a moderating price trend in the Eurozone, with the headline rate hitting the European Central Bank’s (ECB) target. More importantly, the core inflation, which the ECB watches closely, has slowed to 2.3%. This release reduces any immediate pressure on the central bank to adopt a more hawkish stance in the first quarter.<\/p>\n
This data supports recent cautious commentary from ECB officials, who have signaled a “wait-and-see” approach. Unlike the aggressive policy tightening we saw through 2023, the central bank now appears comfortable holding rates steady, especially after its last minor adjustment in the fourth quarter of 2025. The current Eurozone unemployment rate, holding at 6.5% according to the latest Eurostat figures, gives the bank little reason to rush.<\/p>\n
In contrast, the US economy appears more robust, with recent data showing the ISM Services PMI for December coming in strong at 53.8. This reinforces the policy divergence between a cautious ECB and a Federal Reserve that has more reason to maintain higher rates for longer. This fundamental difference is the key driver we see for the Euro in the coming weeks.<\/p>\n
For derivatives traders, this widens the case for bearish positioning on the EUR\/USD. The pair\u2019s technical weakness below the 50-day moving average, combined with this macroeconomic backdrop, is significant. We are seeing implied volatility on three-month EUR\/USD options ticking down to 6.4%, suggesting the market is not expecting any sharp upside surprises.<\/p>\n
Therefore, we believe strategies that benefit from a declining or range-bound EUR\/USD are prudent. Buying put options or establishing bear put spreads targeting the December 2025 low of 1.1589 seems attractive. Selling out-of-the-money calls above the 1.1800 resistance level is another way to capitalize on limited upside potential.<\/p>\n
Regarding interest rate derivatives, this inflation report should cool any lingering expectations for an ECB rate hike in the first half of the year. Back in late 2025, markets were pricing in a more aggressive path. Now, positioning for a flatter Eurozone yield curve or receiving fixed rates on interest rate swaps could prove effective.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Eurozone inflation eases slightly in December; EUR\/USD rises but faces bearish pressure below key averages.<\/p>\n","protected":false},"author":62,"featured_media":17022,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38489","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=38489"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38489\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17022"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=38489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}