The euro is trading sideways around $1.18 against the dollar, influenced by mixed inflation data from various European countries and investor uncertainty about future ECB policy. While German inflation eased, figures from France and Spain exceeded expectations. The ECB maintains a cautious stance, monitoring data and currency movements without signaling immediate intervention. The dollar’s strength, coupled with geopolitical tensions, adds further pressure on the euro.
- The euro held near $1.18 as investors digested fresh inflation data.
- Germany’s EU-harmonized inflation rate eased to 2.0% in February.
- France’s HICP accelerated to 1.1% in January.
- Spain’s HICP rose to 2.5%, above market expectations.
- Money markets assign a 30% probability to an ECB rate cut by December.
- ECB President Christine Lagarde said headline inflation is expected to converge toward the 2% target over the medium term.
- The ECB will monitor currency movements but does not plan direct intervention.
- EUR/USD moves sideways in a narrow band at around 1.1800.
- The US Dollar (USD) appears reinvigorated.
- The ECB also left rates unchanged.
- Speculative net longs in the Euro (EUR) have climbed to their highest since 2020.
- Near term: the US Dollar is still setting the tone.
The mixed inflation signals create uncertainty for the euro. While the ECB remains data-dependent, the strength of the dollar and geopolitical factors exert downward pressure. Increased long positions in the euro suggest a potential for significant movement based on incoming economic data. Overall, the asset’s short-term direction appears to depend on the interplay of these factors.