EUR/USD in the Spotlight: ECB Decision and US Inflation Data Loom

The EUR/USD is a crucial currency pair to watch this week due to several important events, including the ECB's policy decision and two US inflation data releases. The recent escalation between the US and Iran has pushed oil prices higher, but the impact on the euro remains limited. The starting point for any renewed gains in oil prices is much higher than pre-conflict levels, making energy prices less of a concern.

The strong Eurozone economy has kept the euro's downside limited, with both central banks turning hawkish and traders pricing in rate hikes from the ECB. However, the key question is whether the ECB will validate the hawkish repricing of eurozone rates or adopt a more dovish stance. The ECB's decision on Thursday could have significant implications for the euro.

The US inflation data releases, including producer price index (PPI) and consumer price index (CPI), are crucial to watch this week, especially given the divergence within the Fed on monetary policy. A hawkish stance from Chair Kevin Warsh at Jackson Hole contrasts with Governor Christopher Waller's more dovish views last week.