The euro briefly strengthened quite rapidly, but then this currency retreated again in trading on Thursday. Based on the data, it was following the release of the latest Eurozone inflation data in the European session. 

EUR/USD is circulating in the range of 1.0610 as it enters the New York session. It means that this pair was moving away from the week-long high reached yesterday. 

A series of regional data released separately yesterday showed the accelerated inflation rates in France and Spain. Germany's inflation rate in February also still at 8.7%.

That was for year-over-Year as in January. Such a situation has raised market expectations for an increase in the European Central Bank (ECB) interest rate.

Eurozone Inflation Rate Reached 8.5 Percents 

Meanwhile, the situation above also soaring EUR/USD pair as people could see in the market. Unfortunately, today's Eurozone inflation report shows a sustained downward trend even though the pace did exceed expectations. 

It can be seen from a report from Eurostats. The report said that the Eurozone inflation rate reaches 8.5% For year-over-Year as of February 2023. This figure is higher than the consensus estimate.

For your information, the consensus estimates is only 8.2%. However, then it slowed down compared to the 8.6% increase in the previous period 

Eurozone inflation data like this allows the ECB to continue its planned rate hike. However, the data aborted speculation of some market participants who expected higher terminal interest peaks. 

ECB may continues It’s Rate Hike

Inflation is obviously higher than expected, but it may not be as bad as feared. It is given that expectations have shifted following national data in recent days.

That statement was said by Ben Laidler, a Global Market Strategist at eToro London. He also thinks that the basic scenario is for the ECB to continue the pace of rate hikes.

It might be by a magnitude of 50 basis points, which actually remains quite hawkish. A number of other analysts continue to highlight the gap between the macro conditions of the Eurozone and the United States.

They thought that one of the main factors affecting EUR/USD going forward was that aspect. The latest data from the Eurozone and the US recently showed an inflation rate that exceeded expectations.

Euro May Rally Really Sharply 

So the next important question is which region is experiencing faster disinflation. It was interesting since the euro/dollar is well below its one-year interest rate swap.

If the Eurozone inflation does not start to fall and US consumer inflation continues signs of disinflation, the euro could rally very sharply. This was stated by Simon Harvey.

Simon is a head of FX Strategy at Monex Europe where his opinion was agreed by some other analysts. Elsewhere, The US dollar in the Asian session was pressured by the release of the latest China Manufacturing PMI data.

That PMI data was higher than the prediction. China's stronger growth prospects directly support risk assets such as the Australian dollar and New Zealand dollar, while putting pressure on the US dollar. 

Chinese Growth Outlook Increased Significantly 

The Chinese PMI data confirmed expectations that the growth outlook has improved quite significantly in China. That is why; it is positive for risk sentiment as said by Niels Christensen, a Nordea's chief analyst.

This puts the dollar on a defensive Position. Meanwhile, NZD/USD immediately skyrocketed more than 1% to a one-week high, while AUD/USD climbed to its highest level in three days. 

The US dollar was further pressured by the strengthening of the euro due to indications of rising inflation in the Eurozone. A series of regional data released separately in the European session.

It clearly showed the accelerated inflation rates in France and Spain. Inflation data from five German states also held at their respective highs, so germany's inflation rate in February continued to advance 8.7% just like January.