EUR/USD Holds Steady as Markets Eye July CPI Report

The EUR/USD currency pair has held steady in recent sessions, despite some fluctuations. The euro's support comes less from an improvement in the European economic outlook and more from reduced expectations for further Federal Reserve tightening following a weak U.S. labor market report.

The market is waiting with bated breath for the release of the July CPI report at 12:30 GMT today, which could shift the market backdrop. Headline inflation is expected to slow to around 3.4% year over year from 3.5%, while the core rate is forecast at roughly 2.5%. This has markets pricing a 52-53% probability of a 25-basis-point Fed rate hike in September.

The eurozone backdrop is also becoming moderately more hawkish, with inflation accelerating to 2.9% in July. German GDP grew by just 0.2% quarter over quarter in the second quarter, suggesting that the economy is recovering only gradually.