| Time | Country | Event | Period | Previous value | Forecast | Actual |
|---|
| 07:00 | Germany | Retail sales, real unadjusted, y/y | November | -0.1% | -0.5% | -2.4% |
| 09:30 | United Kingdom | PMI Construction | December | 45.5 | 46 | 46.8 |
| 10:00 | Eurozone | Harmonized CPI, Y/Y | December | 2.4% | 3% | 2.9% |
| 10:00 | Eurozone | Harmonized CPI ex EFAT, Y/Y | December | 3.6% | 3.4% | 3.4% |
EUR weakened against its major rivals in the European session on Friday even as data showed a rebound in inflation in the Eurozone, prompting investors to trim their expectations of policy easing by the European Central Bank (ECB) this year.
Eurostat reported the euro area's inflation increased to 2.9% YoY in December from 2.4% YoY in November, marginally belove economists’ expectations of 3.0% YoY. This marked the first acceleration in euro-area inflation since April. Meanwhile, core inflation moderated to 3.4% YoY from 3.6% YoY, matching economists’ forecasts.
The data prompted markets to recalibrate their ECB rate-cut expectations. Money markets are now pricing in fewer than 150 basis points of rate decreases by the ECB this year compared to 174 basis points of cuts seen in late December, according to Bloomberg.
Apart from the ECB rate bets, markets also cut their forecasts for the scope of potential policy easing by other major central banks. Markets now predict less than 150 basis points of rate reductions by the Federal Reserve and less than 125 basis points by the Bank of England by the end of the year.
Still, the anticipated scopes of rate cuts from major central banks are too aggressive.
Investors also adopted a cautious stance ahead of the release of the U.S. December employment situation report later in the day, which could cause a further reassessment of rate-cut bets.