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Euro rises after cooler US CPI softens near-term Fed hike odds

EUR/USD trades around 1.1450 as US CPI falls, with CME FedWatch showing July hike odds dropping to 16% from 40% before the data.

Reported · Written up by our desk · Major Pairs

The euro gained on Tuesday after softer-than-expected US inflation data reduced expectations for a near-term Federal Reserve rate hike, according to FXStreet. EUR/USD snapped a two-day losing streak and was trading around 1.1450, up nearly 0.6% on the day.

FXStreet said the US Consumer Price Index declined 0.4% month-over-month in June, with markets having expected a 0.1% drop after May’s 0.5% rise. Annual inflation eased to 3.5% from 4.2%, and underlying inflation also cooled, with core CPI flat on a monthly basis and annual core inflation slowing to 2.6% from 2.9%.

Traders quickly recalibrated their outlook for Fed policy, FXStreet reported. The probability of a July hike fell to 16% from 40% after the CPI release, while the odds of a September increase eased to 60% from 74%, according to the CME FedWatch Tool.

FXStreet also linked the move in rate expectations to broader uncertainty, pointing to renewed US-Iran tensions that are pushing energy prices higher. WTI crude was around $80.00 and up nearly 12% for the week, and attention shifted to Fed Chair Kevin Warsh’s upcoming congressional testimony later in the session.

Latest closeWTI crude $91.10 ▲3.2%|EUR/USD 1.122 ▼0.3%

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