EUR/USD Steadies as US CPI Report Reinforces Rate Hike Expectations
The EUR/USD pair steadied on Friday after the US Consumer Price Index (CPI) report came in line with expectations, failing to trigger a strong market reaction. The data showed that inflation remains sticky, reinforcing expectations of a Federal Reserve interest rate hike next week.
According to the report, the headline CPI rose 0.4% MoM in August, matching market expectations but accelerating from the 0.1% increase recorded in July. Annual inflation held steady at 3.4%, also in line with forecasts.
The Core CPI, which excludes volatile food and energy prices, increased 0.3% MoM, above the 0.2% forecast and the previous reading of 0.2%. Annual core inflation eased to 2.4% from 2.5%, matching market expectations.
Gasoline prices rose 3.9% in August and accounted for more than one-third of the monthly increase in headline inflation. The US Dollar Index (DXY) tracked the Greenback's value against a basket of six major currencies, trading around 99 after briefly climbing to 99.36 in the immediate reaction to the data.
A pullback in US Treasury yields from multi-year highs also limited the Greenback's advance. The CPI figures followed Thursday's Producer Price Index (PPI) report, which showed that annual producer inflation accelerated to 5.4% in August from 4.8% in July.
Markets now price in an 88% probability of a 25-basis-point interest rate hike at the Fed's September 15-16 meeting, up from 67% earlier in the day.