Eurozone inflation data for the month of January has come in where analysts were expecting; the result being a steady Euro.

According to Eurostat, the year-on-year figure for January read at 1.3%, down from December's 1.4%. The core inflation rate read at 1.0%, up from the previous reading of 0.9%.

If the figure comes in below expectation, we could have seen the Euro come under pressure as we know the European Central Bank will only turn off the taps of their money-printing programme - something that has kept the Euro under pressure for years - if inflation is seen rising back to their 2.0% target level.

The Bank is tipped to announce the completion of the programme at some point this year, and a weaker inflation outturn would surely have delayed this call.

The Euro has rallied over the course of the past year in anticipation of this call being made, so disappointment on this single factor could put the rally in jeopardy.

"The ECB would probably prefer core Consumer Price inflation moved a little closer to its 2% target than it currently is before it makes any disruptive moves," says Jacob Deppe, Head of Trading at Infinox, "wage pressure would help to push inflation up a bit but with unemployment still fairly high across the Eurozone it’s hard to see where that will come from."

Deppe argues that in terms of monetary policy, the inflation picture changes little, if anything. While the ECB has hinted it may bring its €30 billion monthly bond-buying programme to an end early, it would be surprising if it announced anything, let along acted, before April.

“And it’s unlikely to do anything regarding interest rates until inflation shows some signs of picking up. Given the strength of the euro versus the US Dollar, the ECB could even stay its hand for longer than anticipated while it waits for the US Fed to raise rates and the Dollar to strengthen,” says Deppe.

Advertisement

Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.