EUR/USD has increased to around 1.0410 during the North American trading session. The rise follows the release of US PCE data for January, showing core PCE inflation steady at 2.6% year-on-year and a month-on-month increase of 0.3%.
Earlier, the US Dollar experienced gains due to new tariff threats from President Trump, including 25% tariffs on Canada and Mexico. The Philadelphia Fed Bank President supports maintaining current interest rates, anticipating these tariffs could impact US economic growth.
German HICP data showed a year-on-year increase of 2.8% in February, which exceeded expectations. Market forecasts predict the European Central Bank will cut its Deposit Facility rate to 2.5% in the upcoming meeting.
German Retail Sales rose by 0.2% in January, contrary to expectations of no change, and 2.9% on a yearly basis. This follows a contraction of 1.6% in December, suggesting resilient consumer spending trends.
EUR/USD faces selling pressure after breaking out of its recent consolidation range. The next support level is marked at 1.0285, while the resistance level is at 1.0530.
In currency comparisons, the Euro performed well against major currencies today, particularly the Japanese Yen.
The move to 1.0410 comes as traders digest inflation data from the US that, at least for now, suggests price pressures remain stable. A core PCE increase of 2.6% year-on-year was exactly what economists had forecast, and a monthly uptick of 0.3% aligned with expectations. No surprises there, which may explain the relatively muted reaction from markets.
Earlier in the day, the US Dollar briefly strengthened after comments from the former President about raising tariffs. A 25% tariff on goods from Canada and Mexico would, if implemented, throw a wrench into trade relations. These kinds of developments usually push investors to buy up safe-haven currencies like the US Dollar, but with the Federal Reserve likely to hold interest rates steady for now, the rally quickly fizzled out. Even Patrick, who runs the Philadelphia Fed, has made it clear that he sees no need to change rates at the moment. If tariffs slow economic growth, there will be even less urgency to adjust policy.
Economic releases in Europe have added another layer of complexity. Germany’s inflation came in at 2.8% for February, surpassing estimates. Markets have already priced in an interest rate cut from the European Central Bank, with expectations that policymakers will lower the Deposit Facility rate to 2.5% at the next meeting. However, inflation readings like this could lead to some hesitation among ECB officials. If prices keep rising beyond forecasts, the timeline for a rate cut might shift further out.
Retail data out of Germany also painted a slightly different picture from what analysts had predicted. Consumer spending edged up 0.2% in January after a hefty drop in December, signalling that households are still spending despite uncertain economic conditions. Compared with a year ago, sales jumped 2.9%, reinforcing the argument that demand is holding up better than feared.
For those trading EUR/USD, the recent breakout turned into selling pressure rather quickly. The currency pair has resistance around 1.0530, while support sits near 1.0285. If the exchange rate drifts lower, that support zone could be an area where buyers step in again.
Outside of this specific exchange rate, the Euro has performed better today against other major currencies, especially when matched up against the Yen. That suggests Europe’s currency still has a degree of strength, at least for now, even as it faces headwinds from policy expectations and shifting economic data.
