EUR/USD retreats as eight-day advance stalls while US Dollar rebounds

• EUR/USD falls around 1.1770, ending a streak of eight consecutive days of gains.
• Eurozone inflation is revised to 2.6% YoY in March, its highest level since July 2024.
• The US Dollar rebounds modestly after recent losses, with the US Dollar Index hovering near six-week lows.

EUR/USD trades lower around 1.1770 on Thursday at the time of writing, down 0.24% on the day and bringing an end to a sequence of eight consecutive days of gains. The US Dollar (USD) is seeing a modest rebound as overall risk sentiment remains supported, slightly easing the recent selling pressure on the Greenback.

On the European side, the latest inflation figures are providing fundamental support for the single currency. According to revised data released on Thursday, the Eurozone Harmonized Index of Consumer Prices (HICP) rose by 1.3% MoM in March, accelerating from a 0.6% increase in February and slightly exceeding the preliminary estimate of 1.2%. On an annual basis, inflation was revised higher to 2.6%, up from 1.9% previously and marking its highest level since July 2024. Meanwhile, core inflation, which excludes energy, food, alcohol and tobacco, eased slightly to 2.3% YoY from 2.4% the previous month.

The increase in headline inflation appears largely driven by energy prices, suggesting that commodity markets exert upward pressure on price dynamics in the region. This trend could encourage the European Central Bank (ECB) to adopt a more hawkish tone at its next monetary policy meeting scheduled for April 29-30.

For now, however, policymakers are maintaining a cautious approach. ECB President Christine Lagarde recently stated that the institution must remain “completely agile” regarding interest rates, while stressing that there is no bias toward tightening. In a similar vein, ECB policymaker and Governor of the Bank of France François Villeroy de Galhau said on Thursday that it is premature to focus on a rate hike at the April meeting, noting that the ECB needs a critical mass of data before taking action.

Despite this cautious stance, financial markets continue to anticipate a gradual tightening cycle. According to Reuters, investors now almost fully price in a first 25-basis-point rate hike by June, potentially followed by another increase later in the year.

In the United States (US), the US Dollar is benefiting from a modest rebound. The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, trades around 98.25 at the time of press, after touching an intraday low of 97.83, hovering near six-week lows.

On the macroeconomic front, recent US data have been mixed. Initial Jobless Claims fell to 207K, below expectations of 215K, while Industrial Production declined by 0.5% MoM in March, missing forecasts of a 0.1% increase. Meanwhile, the Philadelphia Fed Manufacturing Survey index rose to 26.7 in April from 18.1 previously, signaling an improvement in regional manufacturing activity.

Against this backdrop, market participants are now turning their attention to speeches scheduled later in the day from ECBank officials Joachim Nagel and Philip Lane, which could offer further clues about the future direction of monetary policy in the Eurozone.