EUR/USD falls towards 1.8200 after mixed US Core PCE inflation data

The EUR/USD pair trades around 1.0820 on Thursday's late European session, having registered whipsaw moves during the day due to inflation data coming from both sides of the Atlantic. The pair falls sharply, erasing the gains registered after the release of the US Core PCE  inflation report, which signaled price pressures are gradually cooling in the United States. In the European morning, data from Germany also suggested that inflation is slightly cooling down.

Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, declined to 2.4% on a yearly basis in January, the US Bureau of Economic Analysis reported on Thursday. This reading followed the 2.6% increase recorded in December and came in line with the market expectation. On a monthly basis, the PCE Price Index rose 0.3% as forecast.

The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, also matching analysts' estimates. It also slowed from the 2.9% increase seen in December. 

The US Dollar, gauged by the US Dollar Index (DXY) – which measures the value of Greenback against six major currencies – fell sharply after the publication of the data and trades at 103.77 at the time of writing. The weakness in the US Dollar underpinned the EUR/USD pair near 1.0850, but the major failed to hold onto gains and corrected afterwards.

There were also signs of slowing inflation in Europe's biggest economy. The preliminary German Harmonized Index of Consumer Prices (HICP) grew by 2.7% on year as expected, slower than January’s reading of 3.1%. The monthly headline HICP matched expectations at 0.6%. 

Significant progress in inflation returning to the 2% target would allow ECB policymakers to consider a change in the monetary policy stance. ECB President Christine Lagarde has previously said rate cuts are expected in summer.