Euro steadies as investors weigh inflation data and tariffs

The euro stabilized around the $1.08 level as investors carefully analyzed key inflation data, all while preparing for the impending U.S. tariffs set to take effect on April 2.

Euro steadies as investors weigh inflation data and tariffs

The economic data coming from Germany, Europe’s largest economy, presented a mixed picture. Regional German Consumer Price Index (CPI) figures indicated that inflation remained largely unchanged in March, suggesting that price pressures in the country were relatively stable. However, other flash CPI reports from across the eurozone showed varying trends: France’s inflation rate held steady at a four-year low of 0.8%, signaling relatively weak inflationary pressures, while Spain’s inflation unexpectedly fell to a five-month low of 2.3%. On the other hand, Italy’s inflation climbed to a 1.5-year high of 2.0%, reflecting higher price pressures in the southern part of the bloc.

What will the ECB do?

The slowing inflationary pressures across the eurozone have led to growing speculation that the European Central Bank (ECB) may be prompted to cut interest rates by as much as 65 basis points later this year. This, combined with concerns about global trade tensions and the uncertainty surrounding the U.S.-China trade war, has contributed to a softening of the euro’s value relative to the dollar. The looming tariffs set to be imposed by the U.S. are adding to global uncertainty, further weighing on investor sentiment. At the same time, the euro has gained around 3.1% on the month, benefiting from a broader weakness in the U.S. dollar, which is being pressured by shifting U.S. tariff policies under the Trump administration. Additionally, Germany’s recent approval of a major fiscal package, aimed at stimulating domestic growth and stabilizing the economy, has provided further support for the euro.