Euro Steady Around $1.18 as Inflation Data Shapes ECB Outlook

The euro held near $1.18 as investors digested fresh inflation data and its implications for European Central Bank policy. Germany’s regional CPI suggested easing price pressures in February, while France’s EU-harmonized index accelerated to 1.1% from 0.4% in January, above the 0.7% forecast. In Spain, HICP rose 2.5%, exceeding both January’s 2.4% and market expectations of 2.3%. Money markets currently assign just a 30% probability to an ECB rate cut by December. Speaking to the European Parliament on Thursday, ECB President Christine Lagarde said headline inflation is expected to converge toward the 2% target over the medium term, with food inflation, key to consumer perception, projected slightly above 2% later this year. She added that the ECB will monitor currency movements but does not plan direct intervention in foreign exchange markets.

The euro held just below $1.18 as investors awaited Friday’s inflation data for insight into how euro strength could affect price pressures and the European Central Bank’s policy stance. Money markets currently price in only a 30% chance of an ECB rate cut by December, reflecting expectations that the central bank will remain patient amid easing wage growth and subdued inflation. Speaking to a European Parliament committee on Thursday, ECB President Christine Lagarde said headline inflation is expected to converge to the 2% target over the medium term, with food inflation, key to consumer perception, projected just above 2% later this year. She also noted that the ECB will monitor currency movements but will not intervene directly in foreign exchange markets. Investors also weighed US President Donald Trump’s new 10% global tariffs and a third round of US-Iran nuclear talks in Geneva, amid rising Middle East tensions.

The euro hovered just below the $1.18 level as US President Donald Trump’s new 10% global tariff took effect, adding to trade tensions and dampening investor sentiment. The measure was implemented through an executive order signed last Friday, only hours after the US Supreme Court blocked several of the administration’s earlier import duties. According to Bloomberg, White House officials are drafting a formal order that could lift the tariff rate to 15%. Trump also warned that countries seeking to “play games” with existing trade agreements risk facing higher duties, following the European Parliament’s decision to pause progress on a trade deal with Washington until greater policy clarity emerges from US authorities. Investors are also turning their attention to upcoming inflation readings from Germany, France, and Spain for clearer signals on how the euro’s strength could influence price pressures and shape the policy path of the European Central Bank.