The EUR/USD pair is steady around 1.1700 on Wednesday as markets digest fresh US economic data. A softer US inflation print weakened the Dollar, reinforcing expectations of a Federal Reserve (Fed) rate cut and keeping the pair within familiar ranges.
Euro steadies as weak PPI weighs on the Dollar
The US Producer Price Index (PPI) for August came in below forecasts for both headline and core readings. Even so, market reaction remained muted as traders look ahead to Thursday’s Consumer Price Index (CPI) release and weekly Initial Jobless Claims for September 6.
Across Europe, the calendar was quiet, though investors remain focused on the European Central Bank’s (ECB) monetary policy meeting.
Geopolitical tensions also influenced sentiment. Reports of Russian drones violating Polish airspace sparked a brief risk-off move in EUR/USD, pushing the pair into negative territory. Meanwhile, US President Donald Trump urged the European Union to impose 100% tariffs on China and India as leverage against Russian President Vladimir Putin in the ongoing Ukraine conflict.
Market drivers: Focus on US CPI data
US PPI slowed to 2.6% year-on-year in August from 3.3% previously, while Core PPI eased to 2.8% versus July’s revised 3.5%. Following the release, Fed rate cut bets turned slightly more dovish, shifting by 1 basis point.
The US Dollar Index (DXY) was up 0.10% at 97.85. Looking ahead, markets expect US CPI to accelerate to 2.9% YoY from 2.7%, with Core CPI projected to remain unchanged at 3.1%.
Fitch Ratings forecasts two 25 bps Fed cuts in September and December, followed by three more reductions in 2026. In contrast, the agency does not expect the ECB to ease further. Current pricing shows a 90% probability of a 25 bps Fed cut and a 10% chance of a larger 50 bps move. For the ECB, markets see a 93% likelihood of unchanged policy and just 7% odds of a cut.
Technical outlook: Bullish bias intact despite pullback
EUR/USD has declined for two consecutive sessions, slipping below 1.1700. However, strong support remains around the 20-day and 50-day Simple Moving Averages (SMAs) at 1.1672 and 1.1659, respectively.
The Relative Strength Index (RSI) has eased from 60 to 52, signaling waning bullish momentum and leaving sellers eyeing the 50 neutral level.
Upside potential remains in play if EUR/USD regains 1.1700. A move higher could target 1.1750, followed by resistance at the July 24 high of 1.1788. A sustained break above would open the door toward 1.1800 and 1.1829.
