EUR/USD appreciates to near 1.0450 ahead of German HICP inflation data

• EUR/USD gains ground ahead of Germany’s Final Harmonized Index of Consumer Prices data due on Thursday.
• The Euro may depreciate amid rising global trade tensions ahead of potential US reciprocal tariffs.
• CME FedWatch Tool suggests the likelihood of a Fed rate cut in June has now dropped to nearly 30%.

The EUR/USD pair continues its upward momentum for the third straight session, hovering around 1.0430 during Asian trading hours on Thursday. Investors await Germany’s Final Harmonized Index of Consumer Prices (HICP) data, set for release later in the day. The headline German HICP inflation is expected to remain steady at 2.8% year-over-year in January.

However, concerns over a potential global trade war are weighing on the risk-sensitive EUR/USD pair. The White House indicated late Wednesday that US President Donald Trump could announce his reciprocal tariff plan before meeting Indian Prime Minister Narendra Modi on Thursday, according to CNBC. Trump has recently signaled his intention to impose tariffs on all countries that levy import duties on the United States.

In economic data, the US Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) rose 3.0% year-over-year in January, surpassing the expected 2.9%. Core CPI, which excludes food and energy, increased to 3.3% from 3.2%, exceeding the forecast of 3.1%. On a monthly basis, headline inflation accelerated to 0.5% in January from 0.4% in December, while core CPI climbed to 0.4% from 0.2%.

Stronger-than-expected US inflation data has reinforced expectations that the Federal Reserve (Fed) will keep interest rates at 4.25%-4.50% for an extended period. According to the CME FedWatch Tool, the likelihood of a Fed rate cut in June has now dropped to nearly 30%.

Fed Chair Jerome Powell noted that while inflation has moderated, the central bank still has work to do. Speaking on Tuesday, Powell emphasized that the Fed is in no rush to cut interest rates, citing continued strength in the labor market and solid economic growth.