Market conditions for the euro are currently weak. Inflation in the Eurozone has eased, dampening expectations of an ECB rate hike. Economic data from Germany, including retail sales and labor market figures, further contributed to the euro’s decline. Money markets now anticipate interest rates to remain on hold for the foreseeable future.
- The euro slipped below $1.17, reaching its weakest level since December 9.
- Eurozone consumer price inflation fell to a four-month low of 2% in December.
- Core inflation decreased to 2.3%, slightly below market expectations.
- German retail sales dropped 0.6% in November, the sharpest decline since May.
- Germany’s labor market showed little momentum.
- Money markets now assign almost zero probability of an ECB rate hike by December 2026.
The current economic environment suggests a bearish outlook for the euro. Lower inflation, coupled with weak economic data from key Eurozone economies, reduces the likelihood of monetary policy tightening. This could lead to continued downward pressure on the euro, as investors seek higher returns in other currencies or anticipate further economic challenges for the Eurozone.