EUR/USD falls after US CPI data, ECB decision looms

• EUR/USD falls after US core CPI rose 0.3% on Monday, bolstering expectations for a 25bps rate cut by the Fed.
• The ECB was expected to cut rates by 25 bps this week amid slowing EU economic data and German inflation falling to 1.9% on the year.
• The ECB’s post-September monetary policy decisions could become more complex as inflation components remain sticky.

The euro is set to end Wednesday’s session with tiny losses against the greenback, falling 0.04 percent after the latest US inflation report showed the core consumer price index (CPI) stagnated in August. EUR/USD is trading at 1.1014 after hitting a daily high of 1.1055.

EUR/USD slips as traders await the ECB’s upcoming rate decision

Wall Street ended the session on top, while the greenback finished strong following a rise in the main US consumer price index (CPI). Core CPI in August rose 0.3% on a monthly basis from 0.2% in the previous month, beating estimates. The rest of the inflation figures, namely the headlines in the annual and monthly statistics and the annual core CPI, were in line with estimates.

EUR/USD’s decline was capped by the looming European Central Bank (ECB) monetary policy decision as the pair hit a daily low of 1.1001, immediately returning to the 1.1010-1.1020 area.

Another factor affecting EUR/USD was that money market futures traders cut their bets on a 50 basis point (bps) Fed rate next week, from around 40% to 15%, as which increased 25 basis points from 66% to 85%.

The Eurozone (EU) economic file will present the ECB’s decision before the week. The ECB is expected to cut rates by 25 bps after inflation in Germany reached 1.9% year-on-year, while PMI readings suggest a continued economic slowdown. Despite this, ECB hawks are expected to push back as some components of inflation are stickier than expected.

Regarding forward guidance, sources cited by Reuters noted that the ECB’s monetary policy decisions after September would be more complicated.

Across the pond, the US economic record will include the release of the latest initial jobless claims report for the week ending September 7, along with the release of the producer price index (PPI).

EUR/USD Price Forecast: Technical Insights

EUR/USD is partially neutral, although it remains above the 1.1000 mark, which is ahead of the ECB decision. Momentum has shifted bearish, as seen in the Relative Strength Index (RSI), although its slope is aiming upwards.

Should EUR/USD rise above the September 11 peak at 1.1054, it would sponsor a move to the 1.1100 threshold. Conversely, if the pair breaks below 1.1000, the bulls’ first line of defense would be the 50-day moving average (DMA) at 1.0967, followed by the swing high of July 17, which turned into support at 1.0948 .