Euro moves in a positive zone before German inflation data

The euro rose in European trading on Friday against a basket of global currencies, moving into positive territory versus the US dollar ahead of key inflation data from Germany, the largest economy in the euro area.

These figures are expected to provide further clues about the path of European interest rates this year, especially after Christine Lagarde emphasized that future monetary policy decisions will be data-dependent and assessed on a meeting-by-meeting basis rather than following a fixed path.

Price Overview

• Euro exchange rate today: the euro rose 0.15% against the dollar to $1.1813, from an opening level of $1.1797, recording a session low at $1.1789.

• The euro closed Thursday down 0.1% against the dollar, pressured by Lagarde’s testimony before the European Parliament in Brussels.

Christine Lagarde

ECB President Christine Lagarde delivered key remarks yesterday before the European Parliament’s Committee on Economic and Monetary Affairs, highlighting the following points:

• Efforts to reduce inflation are beginning to bear fruit, with headline inflation declining from 2.5% in January to 2.3% in February.

• Inflation is expected to stabilize around the ECB’s 2% target over the medium term, specifically by the first quarter of 2026.

• She defended the bank’s decision to keep interest rates unchanged, stressing that future decisions will depend on incoming data at each meeting, without pre-committing to a rate-cut path.

European interest rates

• Money markets are currently pricing a roughly 25% chance that the European Central Bank will cut rates by 25 basis points in March.

• Traders have shifted expectations from keeping rates unchanged throughout the year to pricing in at least one 25-basis-point rate cut.

• Investors are awaiting Germany’s February inflation data later today, which could reshape these expectations.

Outlook for the euro

Our expectation: if German inflation data comes in stronger than market forecasts, the probability of ECB rate cuts this year could decline, which would likely support further gains in the euro against a basket of global currencies.