EUR/USD Slides As Soft Inflation In Germany’s Six States Validates ECB Dovish Bets -

EUR/USD Slides As Soft Inflation In Germany’s Six States Validates ECB Dovish Bets

Jan 31, 2025Jeremy ParkinsonFinance0

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. Euro PRICE TodayThe table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.

USD EUR GBP JPY CAD AUD NZD CHF USD 0.28% 0.14% 0.25% 0.04% 0.04% -0.08% 0.15% EUR -0.28% -0.14% -0.05% -0.23% -0.23% -0.38% -0.12% GBP -0.14% 0.14% 0.10% -0.09% -0.11% -0.24% 0.01% JPY -0.25% 0.05% -0.10% -0.21% -0.21% -0.37% -0.10% CAD -0.04% 0.23% 0.09% 0.21% -0.02% -0.15% 0.10% AUD -0.04% 0.23% 0.11% 0.21% 0.02% -0.14% 0.12% NZD 0.08% 0.38% 0.24% 0.37% 0.15% 0.14% 0.26% CHF -0.15% 0.12% -0.01% 0.10% -0.10% -0.12% -0.26%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote). Daily digest market movers: EUR/USD weakens as Trump’s tariff threats improve USD’s appeal

EUR/USD remains under pressure as the broader outlook of the US Dollar (USD) remains firm, with the US Dollar Index (DXY) wobbling around 108.20. The safe-haven appeal of the Greenback strengthens as United States (US) President Donald Trump reiterated his intentions of imposing hefty tariffs on his North American peers and BRICS on Thursday.

Donald Trump said on his social media platform, TruthSocial, that he requires a commitment from the BRICS that it will “neither create a new currency nor back any other currency” to replace the US Dollar. Trump threatened that any country tries should “face 100% tariffs”, and expect to say “goodbye to selling into the wonderful US economy.”

Market experts believe that Donald Trump is using tariff measures as a tool to fulfill his economic agenda, and the imposition of hefty tariffs will be inflationary for the US economy. Such a scenario would support the Federal Reserve (Fed) in holding its stance of keeping interest rates unchanged in the range of 4.25%-4.50% for longer.

On Wednesday, the Fed maintained the status quo and guided to remain in the waiting mode until the central bank sees any “real progress in inflation or some weakness in the labor market”.

Meanwhile, the next move in the US Dollar will be guided by the US Personal Consumption Expenditure Price Index (PCE) data for December, which will be published at 13:30 GMT. Economists expect monthly core PCE inflation to have grown at a faster pace of 0.2%, compared to a 0.1% increase in November. Year-on-year, core PCE is estimated to have grown steadily by 2.8%.

Technical Analysis: EUR/USD returns below 20-day EMA EUR/USD declines to near 1.0370 in Friday’s European session, below the 20-day Exponential Moving Average (EMA) around 1.0390. The major currency pair resumed its correction after failing to sustain above the 50-day EMA, which trades around 1.0449 at the press time.The 14-day Relative Strength Index (RSI) faces barricades near 60.00. Such a scenario indicates that the recovery move was short-lived.Looking down, the January 20 low of 1.0266 and January 13 low of 1.0177 will act as major support for the pair. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.More By This Author:Silver Price Forecast: XAG/USD Recovers To Near $30.50 As Trump’s Tariff Threats Keep Outlook Intact Pound Sterling Trades Flat Against USD As Investors Await US PCE Inflation USD/CAD Trades Subduedly Above 1.4400 Despite US Dollar Slides After Us Data