Eurozone Inflation Rises
EURUSD is back in the green today following a sharp move lower in response to news of Trump’s trade tariffs on Mexico, Canada and China over the weekend. Expectations of similar levies to be applied to eurozone goods are weighing on sentiment. However, we’re seeing some brief recovery action in EUR today on the back of the latest eurozone inflation data this morning. The headline flash CPI estimate for January was seen rising to 2.5% from 2.4% prior, marking its highest level since mid-2024 and the fourth consecutive monthly rise.
ECB Expectations
The data comes on the back of last week’s ECB meeting which saw the bank cutting rates by a further .25% while citing its view that inflation was now under control. However, this latest data suggests that inflationary risks have not fully abated and with the prospect of a trade war with the US looming, inflation might still push higher again, complicating matters for the ECB.
Bearish Risks
Despite the data, the near-term risks remain skewed lower for EURUSD against the current backdrop of USD strength. Indeed, if the US does action trade tariffs against EU goods this could fuel a deeper drop in EURUSD as USD starts to accelerate higher, fuelled by a hawkish repricing of the market’s Fed rates outlook.
Technical Views
EURUSD
For now, the pair remains above the 1.0176 level though sentiment remains heavy and price is vulnerable to a fresh push lower towards the .9993 level next. While current support holds, however, focus is on a recovery and a challenge of 1.0365 and 1.0515 with the latter being the key level bulls need to breach to alleviate near-term bearish risks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.