Above: ECB's Holzmann pushed back against ECB rate cut bets on the weekend. File image of Austria's National Bank Governor Robert Holzmann. Image: Oesterreichische Nationalbank.
Euro exchange rates moved higher on the final full trading day of 2024 after Spanish inflation easily beat expectations.
The Euro was boosted following the release of Spanish CPI inflation data on Monday, which showed a 0.4% month-on-month gain in December.
This beat expectations for 0.3% and represents a doubling of November's 0.2%. The annual rate rises to 2.8% y/y from 2.4%, ahead of consensus estimates for 2.6%.
Analysts closely watch Spanish inflation, and some say it tends to offer an early insight into upcoming trends across the broader Eurozone. One explanation is that the inflationary process is transmitted faster in Spain than in other EZ countries.
These data will validate ECB Governing Council member Robert Holzmann's assessment that the next interest rate cut by the European Central Bank could be longer in coming after a recent uptick in inflation.
"I don't see any interest rate hikes at the moment. What could happen, though, is that one takes more time until the next interest rate cut," Holzmann told Austrian paper Kurier.
Holzmann's call comes after Eurostat said Eurozone annual inflation accelerated in November to 2.2% from 2.0% a month earlier and above the ECB's 2% target rate.
"Yes, there are signs of an upward trend in some energy prices. But there are also other scenarios as to how inflation could return, like via a stronger devaluation of the euro," he said.
The Spanish inflation data and Holzmann's comments push back somewhat against embedded expectations for continuing the steady lowering of European interest rates.
It is this expectation that has weighed heavily on the Euro in 2024. Any pushback against this narrative, as provided by Holzmann and the Spanish inflation data, will, therefore, underpin the single currency.