The EUR/USD pair is showing a downward trend again after a brief spike to the 1.1668 mark. The mood in the market is once again gloomy and anxious. Recent optimism among traders has dissipated, replaced by caution and pessimism. Additional support for the greenback came from the U.S. consumer price index (CPI) data released on Wednesday, despite its contradictory nature.

On one hand, the CPI release was neutral: all its components matched forecasts. On the other hand, the report provided several important signals that should not be ignored.

In dry numerical terms, the situation is as follows: the overall consumer price index in February remained at the January level, at 2.4% year-on-year. On a monthly basis, the indicator slightly accelerated from 0.2% to 0.3%. The core CPI, excluding food and energy prices, also remained at last month's level of 2.5% year-on-year. However, on a monthly basis, the figure slightly slowed down from 0.3% to 0.2%.

The first important signal from the February CPI is that the energy component has once again begun to drive overall inflation: the energy index increased by 0.6% month-on-month, and gasoline prices rose by 0.8%. However, it is essential to remember that the report covers the period before the military actions in the Middle East began, so the February increase is merely a "pale shadow" of what consumers can expect in March.

The second signal for EUR/USD traders is the sustained growth of inflation in the services sector. In particular, medical services increased by 0.5% month-on-month, and airline tickets rose by 1.4%. This indicates persistent demand despite overall economic (and geopolitical) uncertainty.

The third signal is somewhat counteracting, reflecting disinflation: the rent index increased by only 0.1%, the slowest growth rate since 2021. The "overall" category of Shelter also demonstrated a downward trend, declining from 0.3% to 0.2%. This may be the most significant disinflationary signal within the CPI structure, as housing is one of the largest components of the consumer price index (accounting for about 35% of the overall CPI and roughly 40% of the core index). For comparison, in 2022-2023, the growth of Shelter was 0.6-0.8% per month, making the current growth rates 2-3 times lower than peak levels. According to several analysts, if this category continues to grow at its current pace, annual core inflation could drop to the target 2% level within a few months.

Thus, the CPI report cannot be called "hawkish," even though it confirmed the stagnation in annual inflation. The release appeared quite contradictory, and in light of the disappointing February Non-Farm Payrolls (NFP), it seems rather "dovish" than otherwise.

Nevertheless, EUR/USD traders interpreted the report in favor of the greenback "in the moment." However, the U.S. currency is gaining momentum for entirely different reasons. Once again, geopolitics has bolstered dollar bulls, keeping market participants on edge.

It is worth noting that the recent surge in optimism was driven by Trump's statements that the war in Iran would "soon" end and that the oil market would therefore stabilize. Against this backdrop, interest in riskier assets increased, allowing EUR/USD buyers to push the pair to mid-16 figures.

However, Trump's claims of victory were countered by Iran, whose officials issued directly opposite signals. Tehran declared its readiness for a prolonged war of attrition and called for preparation for oil prices around $200 per barrel. Additionally, the Islamic Republic's armed forces announced that they would not limit themselves to merely retaliatory strikes but would conduct attacks "one after another," including on civilian tankers passing through the Strait of Hormuz. It is worth noting that three vessels were damaged in the strait on Wednesday.

Israel also refuted Trump's claims about the swift end of the Middle Eastern conflict. Defense Minister Israel Katz stated that there are currently no timelines for ending the war and that strikes on Iran "will continue as long as necessary" and will not cease "until the objectives are achieved."

In light of such belligerent statements, markets have concluded that the conflict is transitioning to a prolonged phase, and Trump's remarks about a quick end to the war are more wishful thinking than a realistic scenario. Optimistic sentiment has shifted to pessimism, and the safe-haven dollar has once again seen increased demand.

All of this indicates that the downward trend in EUR/USD is justified and well-founded. Corrective surges can still be seen as opportunities to open short positions. The nearest target for the downward movement is the 1.1530 level (the lower line of the Bollinger Bands on the D1 timeframe), and breaking below this would open the path to the main support level at 1.1470 (the lower line of the Bollinger Bands coinciding with the upper boundary of the Kumo cloud on the W1 timeframe).