Investing.com -- EUR/USD ticked up amid sharp downward revisions in euro zone inflation forecasts on Thursday, bolstering the case for further stimulus measures by the European Central Bank when its Governing Council stages its next monetary policy meeting in two weeks.
The currency pair traded between 1.0988 and 1.1050 before settling at 1.1019, up 0.0005 or 0.05% on the session. With the modest gains, the euro halted a three-day losing streak against the dollar. Since falling to three-month lows versus the euro earlier this month, the dollar has rallied more than 2.3% over the last two weeks. During that span, the greenback has closed higher against its European counterpart in eight of the last 10 sessions.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.
On Thursday morning, Eurostat, the EU's statistic agency, lowered its estimates for annual inflation in January by 0.1 to 0.3%, a troubling signal for the ECB, which is attempting to use all tools at its disposal to stave off threats of deflation. On a monthly basis, Eurostat now expects inflation in the euro inflation to plunge by 1.4%, after remaining flat in December. The forecasts were released days before initial estimates of February euro zone inflation come out early next week.
ECB president Mario Draghi has sent strong indications that it will employ all means necessary to boost stubbornly low inflation and stimulate growth when the Governing Council meets on March 10. The ECB could lower its deposit and marginal lending facility rates or even increase the scope and frequency of its comprehensive Quantitative Easing program at the meeting.
The euro has struggled against the dollar since last January when the ECB announced the launch of the asset purchasing initiative. The program involves the purchase of €60 billion a month of assets by the central bank in order to increase the amount of money supply available for banks to lend money to businesses and individuals. Large-scale easing programs also typically push interest rates lower, reducing domestic investments by foreign purchasers and weakening the local currency against its main rivals.
Elsewhere, GBP/USD gained 0.0029 or 0.21% to close at 1.3956, halting a three-day losing streak. The pound slid to a seven-year lows against the dollar on Wednesday, capping a steep fall triggered late last week when the UK reached an agreement with the EU that paves the way for a referendum on leaving the European bloc on June 23.
In the U.S., the dollar pared earlier losses after the U.S. Commerce Department reported that durable goods orders surged by 4.9% in January, their strongest pace in 10 months, rebounding from the previous month when they slumped 4.6%.
Investors were fairly cautious ahead of a trio of economic releases on Friday morning. The second estimate of fourth quarter Real GDP is expected to come in at 0.4%, slightly below initial forecasts of 0.7%, while analysts anticipate a slight uptick in consumer sentiment from February's flash reading. On Thursday, the Federal Reserve Bank of Atlanta lowered its forecast for GDP growth in the first quarter by 0.1 to 2.5%.
The Core PCE Index, which strips out volatile food and energy prices, is forecasted to rise by 0.2% after a flat reading in December. Core PCE Inflation, is the Federal Reserve's preferred gauge, for price stability. On an annual basis, inflation has remained under the Fed's targeted objective of 2% for every month over the last three years.
The Fed could be compelled to delay its pace of tightening if it sees continuing signals of a sluggish inflation outlook. Following December's historic rate hike, the U.S. central bank held its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50 at a meeting last month.
Yields on theU.S. 10-Year fell two basis points to 1.714%, while yields on the Germany 10-Year lost two basis points to 0.14%, dropping to their fifth-lowest level on record.