EURUSD is moving in an Ascending Triangle and the market has fallen from the resistance area of the pattern
#EURUSD Analysis Video
The EUR/USD currency pair is on the rise, gaining momentum for the third consecutive session. As investors await the latest German inflation data, market sentiment remains cautious amid global trade tensions and shifting expectations for the Federal Reserve’s interest rate policy.
Let’s dive into what’s driving the Euro to US Dollar (EUR/USD) movement and what traders should keep an eye on in the coming days.
Germany’s Inflation Data: What to Expect
One of the biggest events shaping the EUR/USD exchange rate is Germany’s Final Harmonized Index of Consumer Prices (HICP) report. Set for release on Thursday, this report provides a key measure of inflation across Europe’s largest economy.
Why Does This Matter?
Inflation data plays a major role in guiding the European Central Bank’s (ECB) monetary policy. If inflation remains steady or increases, the ECB may hold off on cutting interest rates, which could support the Euro. Conversely, weaker-than-expected inflation could raise concerns about economic growth, putting downward pressure on the EUR/USD pair.
As per market expectations, Germany’s HICP inflation is projected to hold steady at 2.8% year-over-year in January. A surprise deviation from this forecast could lead to increased EUR/USD volatility.
Trade Tensions Add Uncertainty to the Market
Beyond economic data, another key factor affecting the EUR/USD exchange rate is rising global trade tensions.
Potential US Tariffs on the Horizon
Recent statements from the White House suggest that US President Donald Trump could soon announce new reciprocal tariffs. These tariffs are aimed at countries that impose import duties on the United States, which could escalate trade conflicts.
According to reports, Trump’s tariff decision may come before his scheduled meeting with Indian Prime Minister Narendra Modi. This move could have wide-reaching economic consequences, particularly for the Eurozone, which relies heavily on international trade.
Impact on the Euro
Trade wars often lead to market uncertainty, which can make investors cautious about riskier assets, including the Euro. If tensions continue to escalate, the US dollar could strengthen as a safe-haven currency, putting downward pressure on the EUR/USD pair.
US Inflation & The Federal Reserve’s Next Move
Another significant factor influencing EUR/USD is the latest US inflation data and its impact on the Federal Reserve’s monetary policy.
EURUSD is moving in a descending channel and the market has fallen from the lower high area of the channel
Stronger-Than-Expected US Inflation
The US Bureau of Labor Statistics reported that consumer prices rose more than anticipated in January. The Consumer Price Index (CPI) increased by 3.0% year-over-year, slightly surpassing market expectations of 2.9%.
Additionally, core inflation, which excludes volatile food and energy prices, climbed to 3.3% from 3.2%, exceeding the projected 3.1%. On a monthly basis, headline inflation jumped to 0.5% in January, while core CPI rose to 0.4%.
What Does This Mean for Interest Rates?
The Federal Reserve closely watches inflation data to determine its next move on interest rates. Higher inflation means the Fed may delay any potential rate cuts, which could keep the US dollar strong against the Euro.
The CME FedWatch Tool, which tracks interest rate expectations, now suggests that the likelihood of a Fed rate cut in June has dropped to around 30%.
Fed Chair Powell’s Take
Speaking earlier this week, Federal Reserve Chair Jerome Powell emphasized that while inflation has moderated, the central bank is not in a rush to cut rates. He pointed out that the US labor market remains strong, and the economy continues to show resilience, which could support higher interest rates for longer.
If the Federal Reserve maintains a hawkish stance, the US dollar could stay strong, making it harder for the Euro to gain ground against it.
Where Does EUR/USD Go From Here?
With multiple factors influencing the EUR/USD exchange rate, the market remains highly dynamic. Investors and traders should keep an eye on:
- Germany’s HICP inflation data – A surprise reading could trigger movement in the Euro.
- US trade policies – If the US moves forward with new tariffs, it could impact global trade sentiment and the Eurozone economy.
- Federal Reserve policy signals – Any updates from Fed officials regarding interest rates could further influence the EUR/USD pair.
Final Thoughts
The EUR/USD pair has gained momentum, but risks remain on the horizon. With Germany’s inflation data due soon, global trade tensions rising, and US inflation proving stronger than expected, the market remains uncertain.
For traders, staying informed about these key factors is crucial to navigating the EUR/USD market. Whether the Euro can maintain its gains or faces new challenges depends on how these economic and geopolitical events unfold.
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