Eurozone Preliminary HICP inflation rises to 2.5% YoY in January, as expected

The Eurozone Harmonized Index of Consumer Prices (HICP) advanced at an annual rate of 2.5% in January after increasing 2.4% in December, the official data released by Eurostat showed Monday. The market consensus was for a 2.5% growth in the reported period.

The core HICP rose 2.7% YoY in January, at the same pace seen in December, beating the 2.6% market forecast.

On a monthly basis, the bloc’s HICP declined 0.3% in January compared to December’s 0.4%. The core HICP inflation arrived at -1% month-over-month (MoM) in the same period versus a 0.5% growth in December.

The European Central Bank’s (ECB) inflation target is 2.0%. The old continent’s HICP inflation data significantly impacts the market’s pricing of the ECB's future interest rate cuts.

Key details from the Eurozone inflation report (via Eurostat)

Looking at the main components of euro area inflation, services is expected to have the highest annual rate in January (3.9%, compared with 4.0% in December), followed by food, alcohol & tobacco (2.3%, compared with 2.6% in December), energy (1.8%, compared with 0.1% in December) and non-energy industrial goods (0.5%, stable compared with December).

EUR/USD reaction to the Eurozone inflation report

The Euro remains deep in the red following the inflation report, with EUR/USD trading near 1.0230 as of writing. The pair is down 1.24% on the day.