EUR/USD Stuck in Range as US Inflation Cools and Middle East Tensions Rise
The EUR/USD currency pair has been hovering near 1.1550 on Wednesday, after a brief volatility flare around US inflation data cooled down and the pair reverted to pre-release levels.
US CPI eased to 3.4% year-on-year in July from 3.5% in June, while prices rose 0.1% month-on-month after a 0.4% fall previously. Core CPI advanced 0.2% on the month and 2.5% on the year, leaving the USD reaction muted.
In Europe, Germany's HICP printed 2.8% year-on-year in July versus 2.4% in June, with energy inflation jumping to 7.3% from 2.7%. The ECB tightening narrative for September remained in focus, but the euro drew limited lift as Middle East tensions resurfaced.
The opposing forces of expected ECB tightening and safe-haven demand for the US Dollar are likely to keep the currency pair contained. Historically, when these two factors clash, EUR/USD implied volatility tends to compress.