Euro tumbles after CPI figures

Published on 10.04.2024 17:18

The Euro is trading down by almost half a percent, keeping its head above 1.0800, after the release of the US Consumer Price Index (CPI) data earlier today which has thrown into doubt the timing of an interest rate cut from the US Federal Reserve 

Data from the US Bureau of Labor Statistics showed prices in the US rose by 3.5% year-on-year in March against analysts' expectations for a figure of 3.4%. This comes after the 3.2% rise YoY in February.  

CPI for core goods, which excludes volatile food and energy prices, rose by 3.8% YoY against a predicted figure of 3.7% and slightly lower than the previous month's number of 3.8%.   

The hotter-than-forecast inflation keeps price pressures well above the Federal Reserve’s (Fed) 2.0% target. It makes it even less likely the Fed will bring down interest rates from their current 5.5% level in June as had been predicted.   

In contrast to the Fed, the European Central Bank (ECB) is seen as more likely to cut interest rates earlier amid more subdued growth and inflation expectations.  

  A few ECB members, such as the President of the Banque de France, François Villeroy de Galhau have mentioned April as a possible time for the ECB to implement a first interest-rate cut.   

The majority of ECB members, however, think April is too early because the ECB will not yet have the latest wage data at hand, and wage inflation is seen as a critical input into their inflation models and decision-making process. 

The EUR/USD currency pair however, could still be moved if the language in the accompanying statement suggests a higher probability of the ECB making an interest-rate cut in June.