- EUR/USD treads cautiously as Eurozone inflation rises moderately in February.
- The annual headline and core HICP rose 2.6% and 3.1%, respectively.
- The ISM Manufacturing PMI data for February will guide the US Dollar.
The EUR/USD pair is teetering near the critical support level of 1.0800 during the current European session on Friday. Despite data revealing that Eurozone inflation in February was more resilient than anticipated, the major currency pair faced a decline.
Eurostat’s report indicated that the preliminary annual Harmonized Index of Consumer Prices (HICP) increased by 2.6%, surpassing the expected 2.5%. January had seen a 2.8% rise. The monthly HICP demonstrated robust growth of 0.6%, bouncing back from a 0.4% contraction in January.
The annual Core HICP, excluding volatile elements like food and oil prices, experienced a faster pace of growth at 3.1%, surpassing the 2.9% forecast. However, it declined compared to January’s 3.3%. On a monthly basis, the Core HICP saw a 0.7% increase, recovering from a 0.9% decrease in January.
Although the data indicates a deceleration in Eurozone inflation for February, it slightly exceeded economists’ expectations. This suggests that the progress towards the 2% inflation target is slow, potentially delaying expectations of interest-rate cuts by the European Central Bank (ECB) in the June policy meeting.
Meanwhile, the US Dollar has stabilized above 104.00 following a robust recovery. Market expectations for rate cuts by the Federal Reserve (Fed) in the June policy meeting have been tempered by the anticipated decline in the United States Core Personal Consumption Expenditure Price Index (PCE) data for January.
In today’s trading session, investors will closely monitor the US ISM Manufacturing PMI data for February, scheduled for release at 15:00 GMT. The consensus expects the index to reach 49.5, an improvement from the previous reading of 49.1.
(Correction: The story was amended on March 1 at 11:22 GMT to clarify, in the fourth paragraph, that the ECB inflation target is 2%, not 22%.)
