At the beginning of the week, the euro has experienced a decline. Over the weekend, the EUR/USD pair fell, reaching a low of 1.0141, marking its weakest point since November 2022. However, on Monday, the euro saw some recovery, currently trading at 1.0277 during the North American session. Despite this rebound, it remains down 0.76% from Friday’s closing value.
In a rapid move, US President Trump implemented 25% tariffs on Mexico and Canada this past weekend, set to take effect on February 4. Both countries have announced their own retaliatory measures. Just a day before the tariffs were scheduled to start, the US announced a one-month delay on tariffs against Mexico. While this pause is positive news, it doesn’t eliminate the possibility of a trade conflict with these neighboring countries, which represent the largest trade zone globally.
While Trump has not yet imposed tariffs on the European Union, he mentioned on Friday that he intends to target EU imports. Concerns of a global trade war have negatively impacted global markets, resulting in a significant rise in the US dollar against several major currencies, including the euro.
In January, inflation in the eurozone rose to 2.5% year-on-year, up from 2.4% in December, exceeding expectations. This marks the highest consumer price index since July 2024, primarily driven by surging energy prices. The core CPI, which excludes food and energy, remained steady at 2.7% year-on-year for the fifth consecutive month, slightly above the anticipated 2.6%. Though this exceeds the European Central Bank’s 2% target, it is the lowest reading since January 2022. Services inflation, significant to the ECB, moderated to 3.9% in January from December’s 4%.
Today’s inflation data underscores ongoing inflationary pressures, potentially complicating the ECB’s plans to lower interest rates and revive the struggling eurozone economy. The ECB is scheduled to meet next on March 6.
