- EUR/USD declines to near 1.0370 as inflation in six states of Germany decelerates in January.
- Donald Trump threatens to impose 100% tariffs on BRICS and 25% on Mexico and Canada.
- The Fed kept interest rates at their current levels on Wednesday.
EUR/USD faces selling pressure and declines to near 1.0370 in Friday’s European session. The major currency pair declines as the Euro (EUR) weakens across the board amid a slowdown in inflationary pressures in six German states. Softer-than-expected Consumer Price Index (CPI) data for January boosts confidence that Eurozone price pressures are on track to return sustainably to the European Central Bank’s (ECB) desired rate of 2%, which will support the central bank in easing the monetary policy.
On Thursday, ECB President Christine Lagarde showed confidence in announcing a victory over inflation this year in the monetary policy statement after the central bank reduced its Deposit Facility Rate by 25 basis points (bps) to 2.75%. In Friday’s European session, ECB policymaker and Estonian Central Bank chief Madis Muller also said that it is realistic for inflation to be near 2% “by the middle of this year”.
Christine Lagarde’s comments at the press conference indicated that the ECB has kept the door open for further policy easing. Lagarde said that we are still in “restrictive territory” and it is premature to “anticipate at what point where will stop”. She avoided providing a pre-defined interest rate cut path and reiterated that we decide meeting by meeting based on data.
Going forward, investors will focus on the flash Eurozone Harmonized Index of Consumer Prices (HICP) data for January, which will be released on Monday.
But before that, the preliminary German HICP data for January will be published at 13:00 GMT. However, the impact is expected to be limited, as the inflation data in six German states have already indicated the current status of price pressures
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