Heightening price pressures in Europe pushed the single-currency to a fresh weekly high of 1.4232, and the EUR/USD looks poised to make another run at 1.4300 as it maintains the upward trend from earlier this year. The headline reading for Euro-Zone inflation unexpectedly increased at an annualized pace of 2.6% in March to mark the fastest pace of growth since October 2008, and the European Central Bank may turn increasingly hawkish going into the following month as it maintains its one and only mandate to ensure price stability. As market participants expect borrowing costs in Europe to increase by 125bp over the next 12-months, the rise in interest rate expectations should help to prop up the single-currency, but the euro could face headwinds going into the end of the week as Ireland’s commercial bank stress test is anticipated to show an impending need for fresh capital. Given the ongoing turmoil within the European financial system, retiring ECB board member Guy Quaden said the Governing Council should be “cautious” in raising the benchmark interest rate at the policy meeting next month, and highlighted the importance of “preserving” the credibility for the euro as the region struggles to contain the risk for contagion. Meanwhile, Portugal missed its 2010 budget deficit target of 7.3 percent as the shortfall accounted for 8.6 percent of GDP, and it seems as though it will only be a matter of time before the country seeks an international bailout as the government faces record-high borrowing costs. As investors speculate Portugal to share Ireland’s ill fate, fears surrounding the sovereign debt crisis are likely to bear down on the exchange rate, and the EUR/USD may trend sideways ahead of the ECB interest rate decision next week as market participants weigh the prospects for future policy. The British Pound slipped to 1.6016 on Thursday as the economic docket reinforced a weakened outlook for the U.K., and the sterling may continue to lose ground going into the following month as the prospects for future growth deteriorate. The GfK consumer confidence survey held steady at -28 for the second month in March to mark the lowest reading since 2009, while a separate report by the Bank of England showed an unexpected rise in mortgage defaults during the first-three months of the year. In response, BoE board member David Miles said that the impact of future rate hikes on the economy will change as the housing market faces a “painful transition,” and went onto say that higher spreads between mortgage rates and the benchmark interest will “create an issue for the MPC” as the central bank aims to balance the risks for the region. As the economic outlook remains clouded with high uncertainty, the BoE may retain its wait-and-see approach throughout the first-half of the year, and the GBP/USD may trade within a broad range over the near-term as region faces heightening inflation paired with subdued growth. The U.S. dollar continued to lose ground against most of its major counterparts on Thursday, but the greenback may regain its footing during the North American trade as investors scale back their appetite for risk. However, with the highly anticipated non-farm payrolls report on tap for tomorrow, the major exchange rates may consolidate over the next 24 hours of trading, and the greenback is likely to face increased volatility on Friday as employment in the world’s largest economy is expected to increase another 190K in March.

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