EUR/USD Rallies Fizzle Amid Stabilizing Rate Expectations

The EUR/USD currency pair has been experiencing a decline after its recent rally driven by the Federal Reserve, Scotiabank's FX team notes. The euro area's Consumer Price Index (CPI) for July came in broadly as expected, with headline inflation at 2.9% year-over-year and core inflation at 2.5% year-over-year.

The French CPI data released earlier offered a brief boost to the EUR, but this impact was short-lived as broader market themes took hold. The European Central Bank (ECB) has been relatively quiet, with no major announcements or speeches scheduled for the next week.

Rate expectations are stabilizing, with about 42 basis points of tightening priced in by December. Scotiabank's fair-value estimate for EUR/USD is in the mid-1.15s, and a near-term range-bound scenario between support at 1.1450 and resistance at 1.1550 is anticipated.