EURUSD Under Pressure After Weak Inflation Data: Eyes on ECB

EURUSD is slowly retreating after the low inflation and PMI data. This adds more downside pressure, which started with the easing of Greenland tensions. Today, the European Central Bank (ECB) will almost surely hold rates and is likely to continue doing so in the coming few meetings as well. Markets will instead focus on how the ECB views risks to inflation.

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On the US side, CPI is at 2.70%, but there is a possibility that CPI might take a dive starting with the next data release. Truflation, an inflation gauge that takes price data daily from 15 million data points and operates on blockchain, shows that yearly inflation took a dive starting in 2026. The January CPI data will be released next Friday, and so far the consensus shows that somewhat similar expectations have formed, only milder. Possible weak jobs data and low CPI data might hinder the dollar’s comeback attempts, putting more downward pressure on the EU inflation.

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EURUSD fell back after testing 1.20 in January and is now trying to stabilize around 1.18.

At today’s ECB meeting, how members see risks to inflation and growth will be important. US tariffs on China and India are causing more low-value products to hit European markets. Although the recent tariff reduction on India to 18%, the recent EU-India trade deal might put further downward pressure on inflation. With the French budget for 2026 confirmed, major trade deals signed with India and Mercosur (South America), and trade negotiations now underway with Australia, Europe is making its moves in the new economic environment. These moves might give the euro an edge in 2026, which could further increase disinflationary pressure and force the ECB to consider cutting rates.

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So far, EURUSD is likely to stay between 1.15 and 1.20, but upward pressure is likely to increase in the coming weeks and push EURUSD into the 1.20-1.25 zone for most of the year.