EUR/USD extends decline as U.S. inflation becomes next key test
EUR/USD is trading around 1.1592 on September 11 and continues to decline after yesterday’s ECB decision. The regulator raised the deposit rate to 2.50%, while Lagarde described the increase as essentially an obvious step against the backdrop of persistent inflationary pressure.
1.1227
1.1273
At the same time, the main signal was not the hike itself, but the absence of a commitment to further tightening: the ECB once again emphasized its data-dependent approach and high uncertainty, while also pointing to upside risks to inflation and downside risks to growth. The market then began pricing in roughly a 50% probability of another hike as early as October and around 89% by December, but the euro still failed to receive sustained support because the current move had been fully priced in beforehand.
PPI keeps pressure on rate expectations
On the U.S. side, pressure on the pair was intensified by yesterday’s PPI data. Producer prices rose by 0.4% m/m and 5.4% y/y in August, while the energy component increased by 4.2%, reinforcing concerns about more persistent inflation. After the release, the 10-year Treasury yield rose above 4.9%, while the probability of a Fed rate hike at the September 15–16 meeting increased to around 70%.
Today, attention is fully focused on CPI, which will be released at 8:30 ET. Consensus expects around 3.4% y/y for headline inflation and 2.4% for core. If core inflation comes in above expectations, the dollar could receive another boost; a softer report, on the other hand, could quickly push EUR/USD back above 1.1600–1.1620.
Yield gap continues to favor dollar
An important change compared with the beginning of the week is that the relative rate backdrop is now working against the euro more strongly than the ECB’s hawkishness is supporting it. European yields did rise after the decision, but the U.S. curve remains even more sensitive to oil and inflation.
As long as Brent remains above $100, the FX market continues to price in the risk of a longer period of high rates in the U.S., limiting attempts by EUR/USD to recover. At the same time, stronger-than-expected ECB growth forecasts are helping the euro avoid a deeper decline.
1.1570–1.1550 becomes next downside zone
The loss of support around 1.1620 and the break below 1.1600, as I warned in EUR/USD gains traction as ECB guidance takes center stage, increase the risk of a decline toward 1.1570–1.1550, but if U.S. consumer inflation slows, a return of EUR/USD above 1.1620 cannot be ruled out, although a large-scale rally is unlikely.
Latest EUR/USD News
-
Afghanistan
-
Albania
-
Algeria
-
Angola
-
Argentina
-
Armenia
-
Australia
-
Austria
-
Azerbaijan
-
Bahamas
-
Bahrain
-
Bangladesh
-
Belarus
-
Belgium
-
Bolivia
-
Botswana
-
Brazil
-
Brunei
-
Bulgaria
-
Cambodia
-
Cameroon
-
Canada
-
Chile
-
China
-
Colombia
-
Congo
-
Costa Rica
-
Cote d'Ivoire
-
Croatia
-
Cuba
-
Cyprus
-
Czechia
-
DR Congo
-
Denmark
-
Dominican Republic
-
Ecuador
-
Egypt
-
El Salvador
-
Estonia
-
Eswatini
-
Ethiopia
-
Finland
-
France
-
Georgia
-
Germany
-
Ghana
-
Greece
-
Haiti
-
Hong Kong
-
Hungary
-
India
-
Indonesia
-
Iran, Islamic republic
-
Iraq
-
Ireland
-
Israel
-
Italy
-
Jamaica
-
Japan
-
Jordan
-
Kazakhstan
-
Kenya
-
Korea
-
Kuwait
-
Kyrgyzstan
-
Laos
-
Latvia
-
Lebanon
-
Lesotho
-
Libya
-
Lithuania
-
Luxembourg
-
Madagascar
-
Malaysia
-
Malta
-
Mauritius
-
Mexico
-
Moldova
-
Mongolia
-
Montenegro
-
Morocco
-
Mozambique
-
Myanmar
-
Namibia
-
Nepal
-
Netherlands
-
New Zealand
-
Nigeria
-
North Macedonia
-
Norway
-
Oman
-
Pakistan
-
Palestine
-
Panama
-
Papua New Guinea
-
Paraguay
-
Peru
-
Philippines
-
Poland
-
Portugal
-
Puerto Rico
-
Qatar
-
Reunion
-
Romania
-
Rwanda
-
Saudi Arabia
-
Serbia
-
Singapore
-
Slovakia
-
Slovenia
-
Somalia
-
South Africa
-
Spain
-
Sri Lanka
-
Sweden
-
Switzerland
-
Syria
-
Taiwan
-
Tajikistan
-
Tanzania
-
Thailand
-
Trinidad and Tobago
-
Tunisia
-
Turkey
-
UAE
-
Uganda
-
Ukraine
-
United Kingdom
-
United States
-
Uruguay
-
Uzbekistan
-
Venezuela
-
Vietnam
-
Yemen
-
Zambia
-
Zimbabwe
- Forex
- Crypto
