Investing.com -- EUR/USD posted slight gains on Friday to end a five-day losing streak, amid solid U.S. inflation data which bolstered hawkish arguments for accelerated monetary policy normalization by the Federal Reserve this year.
The currency pair traded between 1.1067 and 1.1139 before settling at 1.1131, up 0.0024 or 0.22% on the session. Since surging more than 1.65% on February 3, the euro is relatively flat against the dollar, up by 25 basis points over the last two weeks. After crashing approximately 10% versus its American counterpart in 2015, the euro has rallied by more than 2.5% over the first six weeks of the year.
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 Friday morning, the U.S. Department of Labor said its Consumer Price Index (CPI) for January increased by 1.4% from the prior 12 months, gaining 0.7% from December's measure. The Core CPI Index, which strips out volatile food and energy prices, also rose by 0.3% from the prior month, considerably above analysts' expectations of a 0.1% gain. On an annual basis, Core CPI increased by 2.2%, also above forecasts of 2.1%.
The headline reading, though, for monthly CPI remained flat, slightly above expectations for a decline of 0.1%. It came as energy prices crashed by nearly 3% on the month, dragged down by a 4.8% decline in monthly gasoline prices. On the upside, the services component surged by 3.0%, led by increases in medical care and prescription drug prices, while rent and owners' equivalent rent also moved higher.
In minutes from the Federal Open Market Committee's January meeting, released earlier this week, several dovish members said they wanted to see "direct evidence" that long-term inflation was moving toward its objective before raising interest rates again. The Core PCE Index, the Fed's long-term gauge on inflation, has remained below its targeted goal of 2% for every month over the last three years. As such, the members noted that monetary policy was "less well positioned to respond effectively to shocks that reduce inflation than to upside shocks."
Though inflation has been restrained by temporary factors from a stronger dollar and the downturn in oil prices, Fed Cleveland president Loretta Mester noted on Friday that long-run inflation expectations have still been "relatively stable." In a speech on the economy and monetary policy at the Global Interdependence Center in Sarasota, Florida, Mester said she expects the Fed to continue to raise rates gradually if the economy remains strong.
Meanwhile on Friday evening in Brussels, European Council president Donald Tusk said there is unanimous support for a deal between the U.K. and the EU that would give the United Kingdom "special status," in the European bloc. The deal, which was reached after two days of tense negotiations, ostensibly paves the way for a referendum that could lead to the United Kingdom's departure from the EU.
"I have negotiated a deal to give the U.K. special status in the EU," Britain prime minister David Cameron wrote on his Twitter (N:TWTR) account. "I will be recommending it to Cabinet tomorrow."
Yields on the U.S. 10-Year gained one basis point to 1.74%, while yields on the Germany 10-Year lost two basis points to 0.20%. Yields on both 10-year government bonds have fallen by more than 15 basis points over the last year.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.20% to an intraday low of 96.58 before closing at 96.62. For the week, the index rose slightly by 0.45%.