2026.02.0509:25:04UTC+00Euro Softens Ahead of ECB Decision as Inflation Cools

The euro recently dipped below the $1.18 mark, pulling back from last week’s peak of over four years at $1.20, as investors awaited the European Central Bank's (ECB) policy decision scheduled for later today. The market broadly anticipates that interest rates will remain unchanged, as ECB policymakers consider the effects of the recent strength of the euro and the influx of low-cost Chinese imports on inflation forecasts. The ECB has maintained a steady policy since June, describing its current position as favorable. However, some officials have expressed concern that further strengthening of the euro could lead to renewed rate cuts. According to Eurostat, headline inflation decreased to 1.7% year-over-year in January, matching expectations and marking the lowest level since September 2024. Core inflation dropped to 2.2%, slightly under projections, representing its weakest level since October 2021. Simultaneously, the dollar remained steady near a two-week high as investors reduced forecasts for aggressive interest rate cuts by the Federal Reserve.