EUR/USD Forecast: Euro needs strong EU inflation readings to extend rebound

• EUR/USD stabilized above 1.0800 after closing in negative territory on Thursday.
• Inflation data from the Eurozone could drive the Euro’s valuation.
• The US economic docket will feature ISM Manufacturing PMI for February.

EUR/USD came under bearish pressure during the American trading hours on Thursday and closed the third consecutive day in negative territory. Although the pair manages to hold steady above 1.0800 on Friday, it could have a difficult time extending its recovery unless the Eurozone inflation data support the Euro.

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. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching analysts’ estimate. 

Hawkish comments from Federal Reserve (Fed) policymakers following the inflation data helped the US Dollar (USD) outperform its rivals and caused EUR/USD to turn south. Atlanta Fed President Raphael Bostic said that it might be appropriate to start reducing rates in summer, San Francisco Fed President Mary Daly argued that cutting rates too quickly could cause inflation to get stuck and Cleveland Fed President Loretta Mester noted that they can’t expect last year’s disinflation to continue.