EUR/USD Gains as Soft US Inflation Hits Dollar Amid Geopolitical Tensions

The EUR/USD pair has been trading within a two-week range, but recent data suggests it may be gaining momentum. The US Producer Price Index (PPI) missed forecasts, and together with soft Consumer Price Index (CPI) figures, this indicates a moderation in overall price pressures.

This development has pushed the US Dollar to remain depressed below its two-week low reached on Thursday, offering a tailwind to EUR/USD. Market participants are also expecting the European Central Bank to implement one final 25-basis-point rate increase at its September meeting, with inflation still above the 2% objective.

However, geopolitical tensions are offsetting some of this support for the euro. NATO fighter jets shot down a drone over Latvian airspace early Friday, and Finland introduced a temporary restriction on aviation and maritime traffic in the eastern Gulf of Finland.