EUR/USD declines as US data bears up

EUR/USD takes another step lower, breaching the key 1.0800 level over the Easter weekend, as some firm US data suggests the Fed will have to delay reducing interest rates as inflation is likely to remain stubbornly above target. 

On Good Friday, the inflation metric favored by the Fed, the core Personal Consumption Expenditures Price Index (PCE) in February, came out at 2.8%, exactly as expected, if below the 2.9% of January. It showed price pressures remain buoyant and well above the Fed’s 2.0% target. 

US Manufacturing data on Easter Monday was also overall quite positive, with the ISM Manufacturing PMI for March vaulting over 50 – the dividing line between expansion and contraction – from a previous level of 47.8. The result was well above expectations of a rise to 48.4. It was the first result denoting expansion in the US manufacturing sector since November 2022. 

The Euro was kept under pressure, meanwhile, by another ECB rate setter joining the chorus line for a June rate cut. ECB Governing Council member and Austrian Central Bank Governor Robert Holzmann said that the ECB could cut interest rates before the Fed, and in regards to when, “will depend largely on what wage and price developments look like by June