Weaker US Inflation Data May Shift EURUSD Favor

The EURUSD session on Wednesday is centered around the release of US CPI inflation data. This reading has significant implications for determining how the market prices the Federal Reserve's next meeting.

In recent days, expectations for further rate hikes in the US have weakened due to weaker labor market data. The ADP report showed a paltry 44,000 new private-sector jobs, and the subsequent NFP report revealed an unexpected fall of 23,000 nonfarm payrolls.

If the CPI reading comes in below expectations, it will further confirm that the Fed may not need to raise rates again this year. On the other hand, higher-than-expected inflation could provide another argument for rate hikes.

The European Central Bank has already raised interest rates this year and is expected to make another move in September. German data confirms elevated inflation levels at 2.8% year-on-year for both CPI and HICP.