Eurozone inflation re-accelerated from 2.2% to 2.4% in December, a largely base-effect-driven move that was fully expected, ING’s FX analyst Francesco Pesole notes.

EUR/USD may find decent support at 1.0300 for now

“The core rate was unchanged at 2.7%. The ECB’s survey of inflation expectations showed a significant rebound from 2.1% to 2.4% for three years ahead, but we doubt any of yesterday’s numbers will be enough to make the ECB tweak its dovish narrative at this stage. Markets agree and are still pricing in four cuts this year.”

“Our short-term fair value model still returns a 1.3-1.5% risk premium in EUR/USD, which is above the 1.5 standard deviation and in theory a buy signal. But the strong US macro story is fighting technical short-term bullish factors on the pair. Incidentally, markets won’t necessarily need to completely close that risk premium anytime soon, as part of it is still generally justified by downside risks to the eurozone on the back of Trump’s protectionism threats.”

“There is only a speech by French central bank governor Villeroy to watch in the eurozone calendar today. EUR/USD may find decent support at 1.0300 for now.”