- The EUR/USD is quite steady at around 1.1670, especially compared to the recent US CPI data from June.
- US inflation is anticipated to rise more rapidly, both on a monthly and annual basis.
- If negotiations with the US fall through, the EU is preparing to implement proportional measures.
The EUR/USD pair is likely to hold steady at about 1.1670 during Tuesday’s Asian trading hours. Major currency pairs are moving with limited fluctuations as traders await updates on the trade discussions between the US and the European Union.
On Monday, US President Donald Trump revealed that talks with Brussels are ongoing, aiming for a trade agreement before the August 1 deadline, despite introducing a 30% tariff on EU imports over the weekend.
In other news, a Bloomberg report indicated that the EU, comprising 27 nations, is preparing proportional responses if a trade deal with the US isn’t reached. The report mentions that the European Commission has put together a new list of potential tariffs on US goods valued at around $84 billion, which could include commodities like Boeing aircraft, automobiles, bourbon, agricultural items, chemicals, and machinery.
During Tuesday’s session, the June US Consumer Price Index (CPI) data is expected to significantly influence the market, set to be released at 12:30 GMT. Investors are particularly focused on this inflation data, as it will shed light on how sector tariffs might affect price pressures. Current estimates suggest a 2.7% increase in US headline inflation year-on-year, compared to 2.4% in May, while core CPI, excluding volatile food and energy prices, is expected to rise even more steeply to 3%, up from 2.8% beforehand. Both headline and core CPI for the month are forecasted to grow by 0.3%.
As for the upcoming policy meeting in September, traders might have to adjust their expectations regarding interest rates. The Federal Reserve is widely anticipated to maintain rates in the 4.25%-4.50% range at their meeting later this month.
Economic indicators
Consumer Price Index Ex Food & Energy (Year-over-Year)
The Consumer Price Index (CPI) measures inflation or deflation trends by aggregating prices of a selected basket of goods and services periodically. This data is produced monthly by the US Bureau of Labor Statistics. The year-over-year comparison assesses price changes for the same month across different years. Excluding food and energy gives a clearer picture of price inflation, as these categories can be particularly volatile. Generally, higher CPI readings are seen as positive for the US dollar, while lower readings might indicate a bearish outlook.
