Euro Softens Ahead of ECB Decision as Inflation Cools

2026-02-05 09:25 By Joana Ferreira 1 min. read

The euro slipped just below $1.18, retreating from last week’s more than four-year high of $1.20, as investors awaited the ECB’s policy decision later today.

Markets widely expect rates to remain unchanged, with policymakers weighing the impact of recent euro strength and low-priced Chinese imports on the inflation outlook.

The ECB has held policy steady since June, describing its stance as being in a “good place,” though some officials have warned that further currency appreciation could prompt a resumption of rate cuts.

Eurostat data showed headline inflation eased to 1.7% year-on-year in January, in line with expectations and the lowest since September 2024, while core inflation fell to 2.2%, slightly below forecasts and its weakest reading since October 2021.

Meanwhile, the dollar hovered near a two-week high as investors scaled back expectations for aggressive Federal Reserve rate cuts.



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