The euro is experiencing downward pressure, hovering near $1.18 after reaching a multi-year high. Investors are closely monitoring Eurozone CPI data and awaiting the ECB’s policy decision. Inflation figures have shown a softening, raising concerns about the impact of a stronger euro and low-priced imports on future price levels.
- The euro is below last week’s high of $1.20.
- Eurozone headline inflation eased to 1.7%, the lowest since September 2024.
- Core inflation fell to 2.2%, the lowest since October 2021.
- The ECB is expected to hold interest rates steady.
- Some ECB officials warn that further euro strength could prompt rate cuts.
- EUR/USD alternates gains and losses around 1.1800.
- US data releases will be important for EUR/USD direction.
- Strong US data could delay Federal Reserve rate cuts, boosting the USD and weakening EUR/USD.
The data suggests a complex outlook for the euro. Weaker inflation data coupled with a potentially strong dollar could weigh on the currency. While the ECB appears hesitant to make immediate policy changes, the possibility of future rate cuts looms if the euro continues to appreciate, and incoming data supports that decision. Overall, the near-term direction of the euro will likely depend on both European inflation trends and the strength of the US economy.