EUR/USD: A leg higher may occur if Russia agrees to the truce terms – Danske Bank

EUR/USD remains around the 1.09 mark. Yesterday's US February CPI print came in softer than expected, with both headline and core at 0.2% m/m, below consensus, Danske Bank's FX analysts Kristoffer Kjær Lomholt and Filip Andersson report. 

Risks are still tilted to the upside

"Notably, broader core services inflation cooled after January's uptick - a welcome sign for the Fed. While core goods and health care inflation ran slightly hot, overall inflation momentum looks encouraging. The much-awaited speech by President Lagarde's speech at the ECB Watchers conference did not provide any signals on what to expect at the April meeting." 

"Today, the focus shifts to US February PPI and weekly jobless claims. We see EUR/USD consolidating around current levels in the near term, with risks still tilted to the upside. However, we increasingly believe that US pessimism appears overstretched." 

"Markets had largely priced in a Ukraine-Russia peace deal, and while a small additional leg higher in EUR/USD may occur if and when Russia agrees to the truce terms. With US tariffs being rolled out, the key risk is that if upcoming data fails to validate market pessimism on the US economy, the USD could rebound quickly."