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Euro, pound await US CPI for next move versus dollar

Forecasts call for US CPI to cool to 3.4% year-over-year from 3.5%, a change that could shift expectations for Fed policy and move EUR/USD and GBP/USD.

Reported · Written up by our desk · Major Pairs

Action Forex reports that EUR/USD and GBP/USD are holding steady against the US dollar, but price momentum in European currencies has slowed after recent gains as traders wait for fresh direction from the July US inflation report.

The focus is on US Consumer Price Index data, with forecasts suggesting annual inflation may ease to 3.4% from 3.5% and monthly prices may rise 0.1% after falling 0.4% the month before. Core CPI is expected to come in at 2.5% year-on-year and 0.2% month-on-month, and the outlet says weaker-than-expected figures could strengthen expectations for Fed easing and weigh on the dollar, while hotter or more persistent inflation could support the greenback.

In Europe, final inflation readings for Germany and Italy will also be released, but Action Forex expects their impact to be limited unless outcomes differ materially from preliminary estimates.

For EUR/USD, the pair has been trading in a relatively narrow 1.1500 to 1.1580 range, with technical analysis pointing to a possible retest of the lower end around 1.1500. If sellers gain traction below 1.1500, the outlet notes EUR/USD could resume a slide toward 1.1430 to 1.1460, while weaker US CPI could help push it toward 1.1600 to 1.1620. GBP/USD, meanwhile, has pushed to a local high near 1.3500, and technical levels suggest potential movement toward 1.3540 to 1.3560 if 1.3480 to 1.3500 holds as support, while stronger US inflation could trigger another test of 1.3400.

Latest closeEUR/USD 1.155 ▼0.1%|GBP/USD 1.351 ▲0.1%

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