Euro Reaches Two-Day High Before Retreating on Benign CPI Data

The Euro briefly reached its two-day high at 1.1563 after the release of the US July Consumer Price Index (CPI), which showed a benign inflation rate. However, this triggered a repricing for a less 'hawkish' Federal Reserve in 2026, and EUR/USD retreated from earlier gains to trade at 1.1522, down 0.17% at the time of writing.

Despite the US CPI being in line with expectations, investors cut their positions, expecting a rate hike at the September meeting. The odds swung dramatically, with the odds of a hold at 60%, up from 40% before the release of the CPI.

The US July CPI declined slightly from 3.5% to 3.4% YoY, while the core CPI decreased from 2.6% to 2.5% over the twelve months ending in July. Across the pond, Germany's Harmonised Index of Consumer Prices (HICP) in July held steady at 2.8%, unchanged as expected.

Economists warned that energy prices continued to rise at an above-average rate, remaining a crucial driver for inflation. The Eurozone docket will feature the release of inflation data from Spain, alongside an update on Industrial Production in the European Union, which is expected to improve in June from a -1.2% contraction on an annual basis.