EUR/USD Slides as Inflation Fears Intensify Ahead of Crucial CPI Data

The EUR/USD pair has extended its decline to around $1.1592 on September 11, after yesterday's ECB decision to raise the deposit rate to 2.50%. The regulator emphasized that this move is aimed at combating persistent inflationary pressure, as described by Lagarde.

Despite the hike, the market was not expecting further tightening, and the ECB's data-dependent approach has kept uncertainty high. As a result, traders have priced in a roughly 50% probability of another rate hike as early as October, and around 89% by December.

The pressure on the pair intensified yesterday with PPI data showing a rise of 0.4% m/m and 5.4% y/y in August, while the energy component increased by 4.2%. This has reinforced concerns about more persistent inflation, leading to a higher 10-year Treasury yield above 4.9%.

Today's attention is focused on CPI data, which will be released at 8:30 ET. A strong core inflation reading could boost the dollar further, while a softer report might push EUR/USD back above $1.1600, $1.1620.