The euro achieved some slight gains of 0.1% against the US dollar on Friday, reaching the level of 1.07972, and is preparing to break a four-day series of consecutive losses.
The euro’s gains on Friday come after inflation slowed in the United States in February, as was expected, according to the Federal Reserve’s first gauge of inflation, which is the core Personal Consumer Expenditure (core PCE) Price Index.
On an annual basis, inflation slowed to 2.8% in February from 2.9% in January. On a monthly basis, price growth declined from 0.5% to 0.3% in February. While both readings came in accordance with expectations.
The euro was able to achieve these gains despite weak liquidity in the markets, which were closed on the occasion of Good Friday.
In any case, I do not think that Friday’s figures will change the markets’ expectations about the Fed’s expected steps and interest rate cuts next June, as changing the current hypothesis seems to require a large surprise from inflation and labour market readings.
The continued slowdown in core inflation also reassures the Fed that inflation is still on the right track towards its target levels.
While the probability of a cutting rates in June is around 61%, compared to 36% for keeping rates unchanged, according to the CME FedWatch Tool.
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