EUR/USD continued its downward trend for the third consecutive session, trading around 1.1540 during Asian hours on Thursday, as the US Dollar strengthened amid heightened inflationary risks driven by surging energy prices [1]. The February US Consumer Price Index (CPI), released on Wednesday, showed inflation rising 0.3% month-over-month and 2.4% year-over-year, which was largely in line with market expectations [1]. Core CPI, excluding food and energy, increased 0.2% MoM and 2.5% YoY [1]. These steady inflation figures reduced fears of a sudden surge in price pressures and reinforced expectations that the Federal Reserve may keep interest rates steady in the near term [1]. Analysts noted that the CPI report does not yet fully reflect the recent surge in oil prices caused by geopolitical developments, and market participants will be watching the US Personal Consumption Expenditures (PCE) data due Friday for further clues [1].
Michiel Tukker and Benjamin Schroeder of ING Group highlighted that Euro rates remain highly sensitive to energy prices, with markets still pricing in European Central Bank (ECB) rate hikes for 2026 [1]. They suggested that falling energy prices could erase ECB hike expectations and push 2-year yields lower, while persistently high energy costs may initially steepen the euro swap curve before weighing on longer-dated rates [1].
Isabel Schnabel, an executive board member of the ECB, emphasized the need for policymakers to monitor persistent energy price shocks and remain alert to upside inflation risks in Europe [1]. Joachim Nagel, a Governing Council member of the ECB and head of the Deutsche Bundesbank, stated that the ECB stands ready to act if higher energy costs from the Iran war lead to persistently higher Eurozone inflation [1].
CONCLUSION
The EUR/USD pair has weakened as the US Dollar benefits from inflationary concerns tied to rising energy prices. While US inflation data was steady, analysts and ECB officials remain vigilant about the impact of energy costs on future policy decisions. The market is awaiting further data and signals, with medium-term implications for both US and Eurozone monetary policy.