empty
13.03.2025 12:59 AM
EUR/USD: What Does the February CPI Report Indicate?

The CPI report published on Wednesday indicated a slowdown in U.S. inflation. All components of the report were in the "red zone," falling short of the forecast values. While this is an important fundamental signal, it is somewhat outdated as it does not account for the effects of Trump's trade wars.

By the Numbers

According to the released data, the overall Consumer Price Index (CPI) in February decreased to 0.2%, compared to a forecast of 0.3%. The index had been on an upward trend for the previous three months (from November to January) but lost momentum in February. On an annual basis, the overall CPI had been increasing for four consecutive months (from October to January), reaching 3.0%—its highest level since January 2024. Analysts had anticipated it to slow to 2.9% in February, but the actual figure came in lower at 2.8%.

This image is no longer relevant

The core CPI, which excludes food and energy prices, showed a similar pattern. On a monthly basis, it fell to 0.2% in February (after rising to 0.4% in January and a forecasted drop to 0.3%). Annually, core CPI had risen to 3.3% in January but fell to 3.1% in February (forecast: 3.2%), marking its lowest level since May 2021.

The structure of the report shows that energy prices in the U.S. declined by 0.2% year-over-year in February after a significant increase of 1.0% in January. Gasoline prices dropped 3.1% (compared to a 0.2% decrease in the previous month). New car prices fell 0.3%, while used cars slightly appreciated by 0.8%. Growth in transportation service prices slowed from 8.0% to 6.0%, whereas food prices rose slightly from 2.5% to 2.6%.

What Does the Report Indicate?

Following the report's release, EUR/USD initially dropped several dozen pips to 1.0876. However, within hours, the pair returned to the 1.09 level and updated its intraday high.

What does the report suggest? Primarily, it indicates that U.S. inflation had already begun slowing before the new tariffs introduced by Donald Trump took effect in March. According to analysts surveyed by Reuters, the February inflation slowdown is likely temporary. Many expect price growth to accelerate in March and beyond due to the U.S.'s aggressive import tariff policies.

Although the Federal Reserve may officially recognize progress in addressing inflation, two important points must be considered: First, data from a single month does not establish a trend, indicating that it is premature to declare a consistent downward trajectory for inflation. Second, the effects of Trump's trade wars have yet to fully materialize. For instance, the University of Michigan's report on U.S. inflation expectations indicates that long-term inflation expectations have surged to their highest level in nearly 30 years. Surveyed Americans expect prices to rise by 3.5% annually over the next 5–10 years—the highest figure since 1995.

In other words, the "red flag" in the February CPI report has not reduced the risk of stagflation, as the White House only began implementing its tariff measures in March. The U.S. raised tariffs on Chinese goods to 20% and increased tariffs on Canadian and Mexican imports to 25% (though some of these tariffs were later revoked).

This explains the market's relatively muted reaction to the report. While significant, the report does not immediately impact market sentiment. If March's CPI data continues to decline, and key economic indicators (ISM Manufacturing Index, industrial production, retail sales, consumer confidence, and nonfarm payrolls) come out strong, stagflation risks will ease, and the dollar will strengthen. However, the greenback will remain under heavy pressure if inflation accelerates while economic growth slows.

EUR/USD Outlook

Despite the slowdown in the February CPI, the EUR/USD pair shows potential for further growth. Technical indicators support this outlook: on the daily chart, the price is positioned between the middle and upper Bollinger Bands and remains above all Ichimoku indicator lines, which have formed a bullish "Parade of Lines" signal.

The first target for upward movement is 1.0950, which aligns with the upper Bollinger Band on the daily timeframe and the upper boundary of the Kumo cloud on the weekly timeframe. A breakout above this resistance level would allow buyers to push towards the 1.10 level.

Irina Manzenko,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Will Tomorrow Be Better Than Yesterday? (There is a risk of renewed decline in AUD/USD and gold prices)

It's easy to stay optimistic and hope that decision-makers act according to your wishes. Why does this occur? And why can it be a trap for investors? The market sell-off

Pati Gani 09:25 2025-04-08 UTC+2

What to Pay Attention to on April 8? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic events scheduled for Tuesday. However, the current market environment is hardly affected by the macroeconomic background. At this moment, the market has no use for standard

Paolo Greco 07:35 2025-04-08 UTC+2

GBP/USD Overview. April 8. Now It's the Pound Plunging into the Abyss

The GBP/USD currency pair continued its near-crash-like decline throughout Monday. Can anyone even explain, in hindsight, what's happening in the markets right now? There are no questions regarding the drop

Paolo Greco 06:07 2025-04-08 UTC+2

EUR/USD Overview. April 8. 2025 – The Year of Trade Wars

The EUR/USD currency pair traded with notable volatility on Monday. Particularly for a so-called "boring Monday," with no significant events scheduled. Yet yesterday was anything but boring—many experts have already

Paolo Greco 06:07 2025-04-08 UTC+2

The Pound Attempts to Hold Within the Bullish Channel

The United Kingdom is among the few G20 countries that got off relatively lightly—it was hit with a 25% tariff on car exports and a 10% tariff on other goods

Kuvat Raharjo 00:58 2025-04-08 UTC+2

The Euro Adopts a Coyote Tactic

If someone strikes your left cheek, there's no need to plead for mercy. Interestingly, more than 50 countries, according to the White House, have done just that. But not China

Marek Petkovich 00:56 2025-04-08 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is regaining ground after Friday's decline, trading just below the psychological level of 1.1000 amid mixed signals. The U.S. dollar is struggling to capitalize

Irina Yanina 18:55 2025-04-07 UTC+2

XAU/USD. Analysis and Forecast

At the moment, gold has halted its corrective decline from the all-time high reached last week. The recent plunge in global financial markets, triggered by the mutual tariffs initiated

Irina Yanina 18:52 2025-04-07 UTC+2

Jerome Powell Is Not Ready to Intervene

Investors were deeply disappointed when Federal Reserve Chair Jerome Powell made it clear during his Friday speech at the end of last week that he does not intend to intervene

Jakub Novak 11:11 2025-04-07 UTC+2

Markets Descend Further into Chaos (Expect Renewed Declines in #SPX and #NDX)

The global market crash continues. The trade war declared by Donald Trump on much of the world is in full swing. Investors have stopped reacting to economic data, even though

Pati Gani 10:08 2025-04-07 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.