LONDON, March 11, 2026, 10:31 GMT
The USD/EUR hovered close to 0.86 on Wednesday, translating to about $1.1615 per euro in EUR/USD terms, with traders sticking to the dollar for safety ahead of new U.S. inflation figures. Early in the session, the euro tried for a lift but couldn’t sustain momentum, slipping back toward the $1.16 area during European hours.
This shift is hitting funding markets and central-bank expectations directly. The three-month euro-dollar cross-currency basis swap — a money-market measure tracking demand for dollars — slid to 0.625% from roughly 6.4% late Monday. That’s the lowest level since April 2025. Meanwhile, the euro has dropped about 1.5% against the dollar since the Feb. 28 attack on Iran.
With the February U.S. consumer price data set to drop later this day, traders were on alert. Reuters’ economist poll points to headline CPI climbing 0.3% for the month, up 2.4% from a year earlier. The core number—excluding food and energy—is forecast to tick up 0.2%. “Progress on cooling inflation is stalling out again,” Wells Fargo senior economist Sarah House said. Reuters
Bundesbank head Joachim Nagel, speaking to Reuters, said the ECB isn’t ready to act yet, though it’s watching for any sign that rising fuel costs start to push up overall prices. “We must be very vigilant,” Nagel said, reaffirming support for a cautious approach. As it stands, money markets are pricing in just above even chances of an ECB rate hike by year-end. Reuters
ECB Vice President Luis de Guindos echoed those concerns on Wednesday, but flagged risks going in both directions. Oil has surged almost 50% since the year began, he pointed out, and “an amplification of the shock effect” could deal a bigger blow to economic activity than the initial spike in energy prices. Policymakers are left weighing multiple potential outcomes ahead of their March 19 meeting. Reuters
Germany’s EU-harmonised inflation, the bloc-wide gauge for price comparisons, slipped to 2.0% in February, down a notch from January’s 2.1%, according to the latest official figures. Price pressures in Europe’s largest economy appeared to be losing momentum ahead of the most recent spike in oil prices.
The euro wasn’t the only major currency under pressure. Sterling hovered close to $1.3419, and the yen slipped to 158.38 per dollar—evidence that safe-haven flows kept the dollar firmly in demand. “What markets struggle with is ambiguity,” said Khalid Azim, director at Atlantic Council. Kristina Clifton of Commonwealth Bank added she saw the war “to run for months, not weeks.” Reuters
Oil’s squeeze isn’t letting up. According to sources, the IEA is lining up what could be its largest-ever strategic release—over 100 million barrels in the first month alone. Still, crude bounced hard. Traders aren’t convinced even a move that size can counteract the supply threats near the Strait of Hormuz. Brent surged, last quoted up 4% at $91.32 per barrel, Reuters reported.
Any quick fade in the war premium or a cooler U.S. inflation number could upend the case for a strong dollar. The euro, for its part, snapped back Tuesday from a more than three-month trough at $1.1505 as de-escalation hopes surfaced. Michael Brown at Pepperstone called traders’ attention “laser-like” on every geopolitical headline. Over at the ECB, officials continued to preach patience; Austria’s Martin Kocher cautioned, “those who act hastily usually act poorly.” Reuters
