Euro falls, Bunds steady after EZ inflation plunges

LONDON, Jan 6 (Reuters) - The euro hit a three-week low versus the dollar on Tuesday, while euro zone government bonds were steady after a flash estimate of euro area inflation came in much weaker than expected, heaping pressure on the European Central Bank to cut rates.

Inflation in the 15 countries using the euro in December was 1.6 percent year-on-year at a 26-month low, Eurostat estimated, down from 2.1 percent in November and well below the ECB target of just under 2 percent.

By 1007 GMT, the euro had fallen to a three-week low of $1.3373 EUR=. March Bund futures were steady after the data and down by 33 ticks on the day at 124.32.

"This (data) will further free the ECB to cut interest rates at next week's meeting," said Adam Cole, global head of currency strategy at RBC in London.

"The balance of news from Europe is so poor that the market is perceiving that the ECB is behind the curve (on rates)," he said.

(Reporting by London Markets Team)