empty
13.03.2025 12:14 PM
U.S. Inflation Brings Relief to the Fed but Not to the Markets

The euro and pound showed little reaction to news that consumer prices in the U.S. grew at their slowest pace in four months in February—a welcome sign for American households, which remain concerned that Trump's trade policies could drive up costs.

According to the data, the Consumer Price Index (CPI) rose by 0.2%, following a sharp 0.5% increase in January. Core prices, which exclude volatile food and energy categories, also rose by 0.2%.

This image is no longer relevant

The slowdown in price growth was partially due to declining prices for cars and gasoline. Economists, however, expect that the escalation of the trade war will lead to rising prices for various goods—from food to clothing—in the coming months, testing the resilience of consumers and the economy.

The Bureau of Labor Statistics reported that almost half of the CPI increase came from housing, though the pace of growth slowed compared to the previous month. Airfares dropped by 4%, marking the biggest decline since June, while new car prices and gasoline costs also decreased. Food prices, on the other hand, remained largely unchanged after a strong rise in January.

In his address to Congress last week, U.S. President Donald Trump downplayed concerns about rising prices due to tariffs, describing them as a minor inconvenience that the country should be able to overcome. However, uncertainty over trade policies and retaliatory measures from other countries have led to sharp stock market declines and renewed fears of a recession.

Meanwhile, the Federal Reserve remains patient, maintaining a wait-and-see approach until there is greater clarity on inflation trends and the administration's actions. Fed officials have repeatedly emphasized this stance in interviews. It is expected that the Fed will keep interest rates unchanged at next week's meeting, which limited the upside potential for risk assets like the euro and pound on Monday.

The combination of easing inflationary pressure and increasing risks of economic slowdown suggests that the Fed is approaching a point where it will need to resume cutting interest rates. However, that moment has not arrived yet.

Some economists analyzed this inflation report as an early indicator of Trump's tariffs' impact—which began last month with duties on all Chinese imports and have since expanded to include certain Mexican and Canadian goods. However, core goods prices rose only 0.2%, while categories such as furniture, toys, and televisions remained unchanged.

EUR/USD Technical Outlook

At the moment, EUR/USD buyers need to break through the 1.0930 level to target a test of 1.0970. From there, an advance toward 1.1010 is possible, but without strong support from institutional traders, this will be difficult. The ultimate target is 1.1050.

In the event of a decline, significant buying interest is expected around 1.0870. If no major buyers emerge at this level, a further drop toward 1.0840 or even 1.0800 could be possible before considering long positions.

GBP/USD Technical Outlook

For GBP/USD bulls, breaking the nearest resistance at 1.2960 is key to targeting 1.3010, beyond which further gains will be challenging. The main upside target is 1.3040.

If the pair falls, bears will attempt to regain control at 1.2940. A break below this range would deliver a serious blow to bullish positions, driving GBP/USD toward 1.2915 with the potential for a further drop to 1.2875.

Jakub Novak,
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

USD/JPY. Analysis and Forecast

The USD/JPY pair remains under pressure despite the U.S. dollar posting moderate gains for a second consecutive day, approaching the 144.00 level. Improved global risk sentiment following the trade agreement

Irina Yanina 15:01 2025-07-03 UTC+2

XAU/USD. Analysis and Forecast

Gold prices are struggling to gain momentum after a moderate intraday rebound from the $3340 level. Traders remain cautious, preferring to await the release of the U.S. Nonfarm Payrolls (NFP)

Irina Yanina 12:21 2025-07-03 UTC+2

EUR/JPY. Analysis and Forecast

consecutive day, once again approaching the yearly high reached earlier this week.The trade agreement between the United States and Vietnam has eased concerns over a prolonged trade conflict, increasing investor

Irina Yanina 12:13 2025-07-03 UTC+2

Good News Will Support Stock Markets and Token Demand (Potential Upside for Bitcoin and #NDX)

The market has ignored extremely weak employment data from ADP, focusing its attention on other factors. The ADP report released on Wednesday showed a significant slowdown in the U.S. private

Pati Gani 10:40 2025-07-03 UTC+2

Trump Targets China Through Vietnam

Yesterday, it was revealed that President Donald Trump had reached a trade agreement with Vietnam. This came after several weeks of intense diplomatic negotiations between the two countries and just

Jakub Novak 10:00 2025-07-03 UTC+2

A Wake-Up Call for the U.S. Economy

Yesterday's U.S. employment data served as a wake-up call for the American economy. According to the report, the number of employed persons declined in June for the first time

Jakub Novak 09:55 2025-07-03 UTC+2

The Market Bets on Profits

The market remains confident in a positive future. It hears only what it wants to hear. Negative news is ignored, allowing the S&P 500 to set new records. It doesn't

Marek Petkovich 09:35 2025-07-03 UTC+2

What to Pay Attention to on July 3? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are scheduled for release on Thursday, including some key reports. As a reminder, U.S. labor market and unemployment data are typically released on Friday

Paolo Greco 06:53 2025-07-03 UTC+2

GBP/USD Overview – July 3: Jerome Powell Finally Responded to Trump

The GBP/USD currency pair plummeted on Wednesday like a stone. However, every drop in the pair eventually gives way to a much stronger rise. Therefore, at this point, there's

Paolo Greco 03:45 2025-07-03 UTC+2

EUR/USD Overview – July 3: One Big Trump Law Passed, Dollar at 4-Year Lows

The EUR/USD currency pair traded relatively calmly on Wednesday, although the word "calm" may not accurately describe the daily decline of the dollar. The most accurate picture of what's happening

Paolo Greco 03:45 2025-07-03 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.