As of Thursday, the EUR/USD exchange rate hovered around 1.1800, showing little change throughout the day. A minor dip followed comments from the European Central Bank (ECB) President Christine Lagarde.
During her address to the European Parliament’s Economic and Monetary Committee, Lagarde stated that the ECB’s actions to combat inflation were showing results, suggesting that inflation should stabilize at the 2% target in the medium term. She also mentioned that food inflation is likely to ease, settling just above the 2% mark by the end of 2026. Importantly, she highlighted that the ECB remains focused on data and must stay flexible in its approach.
These remarks seem to suggest that there may be a lengthy pause in monetary policy adjustments, which could limit any immediate boost to the euro. In contrast, recent business surveys from the euro area paint a more intricate picture of the economy. The business confidence index for February came in at 98.3, a decline from January’s adjusted 99.3 and below expectations. On the consumer side, the Confidence Index was reported at -12.2, showing slight improvement from the previous month but still remaining in negative territory.
Investors are now anticipating the preliminary German Consumer Price Index (CPI) figures set to be released on Friday.
Simultaneously, the US dollar is gaining some strength. The Dollar Index (DXY), which gauges the U.S. dollar against a basket of six major currencies, has found support and is trading around 97.70, as market participants navigate through the uncertainties surrounding U.S. trade policy. Although a recent U.S. Supreme Court ruling has questioned aspects of President Donald Trump’s tariff strategy, many believe the government will aim to maintain the trade agreement.
Regarding monetary policy, investors generally expect the US Federal Reserve to keep interest rates steady during its upcoming meeting. This sentiment could bolster the US dollar in the near term. Additionally, weekly jobless claims data expected later today might shed more light on the health of the U.S. labor market.
