The Euro fell 0.36% on Friday to $1.0904 and is on course for a 1.2% decline in the week, the steepest weekly fall since mid-May and ending a three-week streak of increases.

Inflation throughout the bloc rose to 2.9% in December from November’s reading of 2.4%, just falling short of forecasts for a reading of 3.0%.

The data is in line with the European Central Bank’s (ECB) prediction that inflation bottomed out in November and will remain within the range of 2.5% to 3% throughout 2024, exceeding the bank’s target of%, before a slowdown in 2025, Reuters news agency reports.

In regard to the number of likely rate cuts this year, traders forecast the ECB will slash rates six times in 2024, with the first in March or April. Whereas policymakers believe it may take until the middle of the year for the required confidence that inflation is under control.

Furthermore, the Dollar rose on Friday, on track for its sharpest weekly rise since May as traders reduced expectations of early rate cuts in the US this year.

Last month, officials at the Federal Reserve forecast 75 basis points of rate cuts in 2024, whilst money markets forecast double this amount.

However, since the beginning of the year markets have scaled back their expectations. As it stands, traders are now pricing in under 140 basis points of cuts this year. According to the CME FedWatch tool, the chance of a cut in March is now at 62%, compared to 86% a week earlier.

At the time of writing the Dollar was up 0.35% against a basket of currencies at 102.79, after hitting a three-week top. For the week the Dollar index has risen 1.4%, its most robust performance since mid-May.