The EUR/USD currency pair continued to feel pressure during Wednesday’s European trading hours and was holding below the key psychological level of 1.0800. The currency pair is on a bear run. Traders are scrambling and overreacting to a rising demand for the US Dollar sparked from the latest tariff threats by President Trump. These moves have taken shape amid a backdrop where economic data releases and hawkish-sounding central bank language have sent markets into a tizzy.
The UK’s Office for National Statistics (ONS) this morning announced another fall in annual CPI inflation. It ticked down to 2.8% in February, a dip from 3% in January. This decrease in inflation has begun to change the momentum of the EUR/USD pair, resulting in changes to investment strategies. The European Central Bank's (ECB) dovish comments are contributing to the pair's challenges, creating a cautious atmosphere ahead of US economic data releases and Federal Reserve communications.
Internationally, Japan is judiciously starting to see marks of an economic recovery. Koeda may be a new board member of the Bank of Japan (BoJ), but she clearly has rising prices on her mind – along with wage increase. Together, these trends indicate a possible encouraging turn in Japan’s long stagnant economy.
“We are seeing signs of progress on rising prices alongside wage hikes.” – Junko Koeda, Bank of Japan (BoJ) new board member
United States market participants are basically holding their breath looking forward to next week’s business surveys and consumer surveys. These surveys will further allow them to gauge the overall direction of the US economy. Coming in later this week will be the Core Personal Consumption Expenditures (PCE) index. This index is the Federal Reserve’s preferred measure of inflation. How these reports will affect market participants’ positions and trading strategies remains to be seen.
US President Trump’s tariff announcements, now due next week, still hang threateningly over the markets. The anticipation surrounding these tariffs is already influencing the US Dollar's strength as traders position themselves in response to potential economic impacts. Recent news articles and circulating speculation on these tariffs are increasing market volatility.