EUR Weakens After European Inflation Data, DYX Index Rebounds
The euro (EURUSD) weakened against the US dollar at the forex market on Tuesday, trading at $1.17, after European inflation data suggested easing price pressures. The market has begun to factor in uncertainties over the European Central Bank rates adjustment in 2026.
The US dollar rebounded against its trading pairs on hope that Federal Reserve rate cuts remain uncertain. The markets expect the Federal Reserve will maintain a neutral interest rate stance at its next two monetary policy meetings, scheduled for January 28, 2026, and March 18.
FX data showed that the DXY index, which measures the dollar’s strength against other currencies, has advanced with a positive slope, reaching the 98.5-point area, moving closer to the psychological 100-point level.
The European single currency retreated at the time the record shows that Germany’s inflation fell to 1.8% in December, below forecasts of 2% and under the ECB’s 2% target for the first time since September 2024, driven by softer food prices and a sharper drop in energy costs.
The EU-harmonized consumer price index also rose just 2%, the lowest since July and below the anticipated 2.2%. In France, inflation missed expectations as well, with the national CPI up 0.8% and the harmonized rate 0.7%.
Money markets now see almost zero chance of an ECB rate hike by December 2026, and only about 24% probability by March 2027. Investors are turning their attention to full Eurozone inflation results due Wednesday, after the ECB signalled last month that interest rates are likely to remain on hold amid resilient growth and inflation near target.
Over the past five trading sessions, EUR/USD price action has shown a consistent bearish bias, accumulating a short-term decline of close to 1%.
One of the main drivers behind this growing weakness has been central bank dynamics, particularly in the United States, where new guidance could emerge following the release of key employment data scheduled for this week.
FX analysts said should U.S. rate cuts fail to materialise, this factor may continue to act as a relevant catalyst for a temporary recovery in U.S. dollar confidence.
If this environment persists, the euro could continue to lose ground, allowing for more persistent selling pressure in EUR/USD over the coming sessions. Naira Rises to N1,419 after Historic Performance in 2025
