EUR/USD Grapples with Direction Ahead of US CPI Release

The EUR/USD has been struggling to find direction as investors await the release of the US Consumer Price Index (CPI) data for August. The hot Producer Price Index (PPI) report has led to a fresh escalation in hawkish Fed prospects, while the European Central Bank (ECB) is expected to raise interest rates again this year.

The Euro trades at around 1.1608 against the US Dollar during the European trading session on Friday, and has been stuck in a tight range between 1.1566 and 1.1641 for over 10 days. The ECB's recent rate hike announcement and President Christine Lagarde's warning of price pressures remaining elevated have led economists at Commerzbank to shift their view to a more hawkish stance on the ECB's policy path.

They now project another 25-basis-point increase in the deposit rate to 2.75% in December, and do not anticipate a reversal of the ECB's rate hikes in the second half of next year. The EUR/USD is expected to find direction after the US CPI data release, with investors paying close attention to headline inflation figures.

The US Consumer Price Index (CPI) report is expected to show that headline inflation remained steady at 3.4% Year-on-Year (YoY), while core figures are expected to drop to 2.4% from the previous reading of 2.5%. The EUR/USD trades close to the 20-period exponential moving average, hinting at a sideways trend.