- EUR/USD turns positive for the third straight day amid a broadly weaker USD.
- Friday’s US PCE data fueled stagflation fears and continues to weigh on the buck.
- Trade war fears could limit USD losses and cap the pair ahead of German CPI.
The EUR/USD pair attracts some dip-buyers following an Asian session dip to the 1.0800 neighborhood and looks to build on its bounce from a multi-week low touched last Thursday. The uptick, however, lacks bullish conviction, with spot prices currently trading near the 1.0835 region, unchanged for the day.
The US Dollar (USD) remains under some selling pressure for the third straight day amid the risk of stagflation in the US and turns out to be a key factor acting as a tailwind for the EUR/USD pair. The USD bulls seem rather unimpressed by signs of rising inflation, which might hold back the Federal Reserve (Fed) from resuming its rate-cutting cycle in June. In fact, the US Personal Consumption Expenditure (PCE) Price Index released on Friday showed that the core gauge that excludes volatile food and energy prices rose 0.4% in February, marking the biggest monthly gain since January 2024 and lifting the yearly rate to 2.8%.
Adding to this, the University of Michigan survey showed that 12-month inflation expectations soared to the highest level in nearly 2-1/2 years during March. This overshadowed Consumer Spending data, which accelerated 0.4% last month after a downwardly revised 0.3% decline in January. This comes on top of the uncertainty over US President Donald Trump’s trade policies and should allow the Fed to adopt a ‘wait-and-see’ approach towards easing monetary policy further. The outlook, however, does little to provide any meaningful impetus to the Greenback or exert any downward pressure on the EUR/USD pair.
The shared currency, on the other hand, seems to draw support from easing EU-US trade war concerns. In fact, the European Commission (EC) signaled that it has prepared concessions for the US to escape Trump’s so-called reciprocal tariffs, which he will announce on Wednesday. However, the prevalent risk-off mood could offer some support to the safe-haven buck and cap the upside for the EUR/USD pair. Traders now look forward to the release of the prelim German consumer inflation figures for some impetus. The fundamental backdrop, meanwhile, supports prospects for a further appreciating move for the pair.
Economic Indicator
Consumer Price Index (YoY)
The Consumer Price Index (CPI), released by the German statistics office Destatis on a monthly basis, measures the average price change for all goods and services purchased by households for consumption purposes. The CPI is the main indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.