FX.co ★ Euro Steady Ahead of Inflation Data

The euro hovered just below $1.18 as investors awaited Friday’s inflation data for clues on how the currency’s strength might influence price pressures and the European Central Bank’s policy path. Money markets are currently pricing in only about a 30% probability of an ECB rate cut by December, suggesting expectations that policymakers will stay cautious in the face of easing wage growth and still-muted inflation.

Addressing a European Parliament committee on Thursday, ECB President Christine Lagarde said headline inflation is expected to converge toward the 2% target over the medium term. She highlighted that food inflation—crucial for how consumers perceive overall price developments—is projected to remain just above 2% later this year. Lagarde added that while the ECB will closely track currency fluctuations, it does not intend to intervene directly in foreign exchange markets.

At the same time, investors assessed the potential impact of US President Donald Trump’s newly announced 10% global tariffs and a third round of US–Iran nuclear talks in Geneva, set against a backdrop of escalating tensions in the Middle East.