Inflation data supports higher Euro

The Euro is trying to head higher against the US Dollar on Tuesday, after inflation numbers for the Eurozone revealed that disinflation has ended, for now.

Earlier expectations were revised after the preliminary German Harmonised Index of Consumer Prices (HICP) data for December, released on Monday, showed that the monthly headline HIPC inflation jumped by 0.7%, above the 0.5% estimate. On a yearly basis, headline HICP rose by 2.9%, compared to 2.4% in November.

Meanwhile, markets are on edge over the whipsaw reactions and knee-jerk moves over the tariff plans from President-elect Donald Trump.

The Washington Post published a comment mentioning that Trump was considering simplifying his tariff schemes by imposing a single universal tariff on critical imports and goods. Hours later, Trump himself came out to refute the rumours and confirm that the schemes and plans would remain in place as earlier announced.

The French preliminary HICP for December, released earlier on Tuesday, snapped the previous disinflationary print by jumping 0.2%, below the 0.4% expectation and above the -0.1% from November.

The yearly gauge came in at 1.8%, which is 0.1% higher than the 1.7% from November.

In the preliminary Eurozone HICP for December, the monthly headline HICP jumped to 0.4%, snapping the disinflationary -0.3% from the month before. The yearly headline HICP came in at 2.4% as expected, against the 2.2% from November.

The monthly core HICP rallied to 0.5%, beating the -0.6% from November. The yearly core HICP came a touch higher than expected at 2.8% against 2.7% consensus view and the previous reading.

For now, the European Central Bank is projected to cut its policy rate by 25 basis points on January 30.

Italian inflation saw a similar pattern as in Germany, with the preliminary December monthly HICP heading to 0.1% from -0.1%.

German Bunds ticked up quite a bit last week and stretched up to 2.47% on Monday. On Tuesday, rates are starting to ease, with the Bund currently trading around 2.46%. European equities are having a change of heart after the European inflation data, and are heading into green numbers.