Euro area February 2026 inflation data is due this week for Belgium, France, Spain, Slovenia, Portugal, and Germany, with more releases next week. Nomura expects euro area HICP inflation to average slightly below the ECB’s 2.0% target in H1 2026, mainly because of energy base effects.
For 2027 and 2028, Nomura sees risks tilted to the upside. The key drivers are a strong labour market, rising wage pressure, and GDP growth running above potential.
Medium Term Curve Steepening Opportunity
In Germany, Nomura says risks are lower than its forecast due to energy prices and the chance of more pass-through from lower electricity grid charges. At the same time, it flags services inflation as an upside risk.
In France, the increase in February versus January is explained almost entirely by energy base effects. Downside risks come from a cut in regulated energy prices.
For Spain, Nomura says risks are balanced.
With key February 2026 inflation releases coming in, we expect prints to be slightly below the ECB’s 2% target. This is mostly a technical move driven by energy base effects, as inflation is now being compared with the early-2025 energy spike. This temporary dip could keep short-term rate expectations steady for now.
Options And Volatility Positioning
We see a risk that markets are focusing too much on this temporary disinflation and missing the pressures building for 2027. Eurostat’s latest data shows unemployment still at a multi-decade low of 6.4%, and the ECB’s wage tracker for Q4 2025 remains elevated at 4.1%. Along with GDP growth now expected to run above potential, these signals point to inflation pressure returning more strongly.
This sets up an opportunity in rates to position for a steeper yield curve over the medium term. Traders could use interest rate swaps or futures to express a view that longer-term rates will rise more than short-term rates. In other words, current pricing for late 2027 and 2028 may not fully reflect the wage and growth pressures ahead.
The gap between the near-term outlook and the longer-term inflation risks also points to higher uncertainty around central bank policy. That backdrop can support options strategies that benefit from higher interest rate volatility. Today’s calm market may be under-pricing the chance of a sharper policy debate later this year and into 2027.
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