In February 2025, Italy’s consumer price index increased by 0.2% on a monthly basis, meeting expectations. This data reflects the country’s inflationary trends and economic environment.

The EUR/USD pair remained steady around 1.0400, influenced by heightened demand for the US Dollar amid tariffs and geopolitical issues. Despite positive German retail sales, the Euro faced challenges amidst ongoing inflation concerns.

Looking ahead, the US Bureau of Economic Analysis is set to publish the January core Personal Consumption Expenditures price index data, projected to show a 0.3% monthly increase. Meanwhile, GBP/USD traded near 1.2600, reacting to uncertainty over US tariffs and upcoming inflation data.

The recent inflation figure from Italy shows that price increases are moving as expected. This suggests that inflation is neither speeding up nor slowing down unexpectedly, which helps traders anticipate central bank decisions. Since inflation is one of the biggest factors in shaping interest rate expectations, this stabilisation reassures markets for now.

At the same time, the Euro has struggled to gain traction, and we have noticed that it remains under pressure, particularly against the Dollar. While positive German retail sales might have usually helped the currency, broader concerns over inflation and global trade tensions have outweighed these gains. The fact that the pair has stayed near 1.0400 tells us that traders are prioritising the safety of the Dollar in the current environment. The ongoing geopolitical concerns and tariff discussions appear to be strengthening this sentiment.

A great deal of attention now shifts to inflation data from the United States. The upcoming core PCE report is likely to influence expectations around monetary policy. If the monthly rise comes in at 0.3% as anticipated, it reinforces the view that the Federal Reserve has little reason to adjust its stance in the immediate future. However, if this number surprises in either direction, we would likely see movements across Dollar-based pairs.

Sterling, on the other hand, has been holding around 1.2600. This reflects the careful positioning of traders as they await further developments on both tariffs and inflation data. With the next wave of economic releases approaching, we are preparing for possible changes in market sentiment that could affect trading strategies.

In the coming weeks, traders should remain alert to new data releases, particularly those that could alter interest rate expectations. Inflation numbers have dominated decision-making in recent months, and that seems unlikely to change given current conditions. As always, closely watching economic data and market reactions will be key.