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EUR/USD holds near two-month high as oil lifts inflation jitters

Crude oil pushing to a two-week top is reviving concerns over US inflation, keeping pressure on the EUR/USD outlook despite soft US data.

Reported · Written up by our desk · Major Pairs

EUR/USD was steady in the 1.1575 to 1.1580 area in Tuesday's Asian session, after pausing a modest pullback from a two-month high, FXStreet reported. The pair had drifted lower from the 1.1350 area, with the broader move shaped by expectations around US rate policy.

FXStreet said last week’s US data, including soft inflation and weak consumer spending, undercut expectations for imminent Fed hikes and helped the USD Index fall to its lowest level since June 16 on Monday. At the same time, rising crude oil prices are keeping “inflation jitters” on the table, which could support a more hawkish Fed stance.

The newsletter also pointed to Middle East developments tied to the US-Iran standoff, which it said kept a war-risk premium in play and lifted crude to a two-week top. With that feeding inflation worries, the focus for drivers in the near term is the FOMC Minutes due on Wednesday, which investors will use for clues on the Fed’s path.

On the European side, FXStreet noted growing acceptance that the European Central Bank will deliver one final 25 basis point rate hike in September, which may continue to support the euro and limit downside for the currency pair. The report added technical levels, including resistance just under the 50% retracement of the April to June decline and support tied to the 38.2% Fibonacci retracement.

Latest closeWTI crude $82.40 ▲1.4%|EUR/USD 1.157 ▲0.4%

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