Recent analysis from ING and BNY highlights a period of pronounced weakness for the US Dollar (USD) ahead of the upcoming Consumer Price Index (CPI) release, with significant implications for the EUR/USD currency pair. ING’s Francesco Pesole notes that with key Eurozone data already released and European Central Bank (ECB) communication subdued, the EUR/USD exchange rate is now primarily influenced by US economic developments. Pesole suggests that a softer US CPI could trigger a break above 1.1600 for EUR/USD, with the 200-day moving average at 1.1630 serving as the next resistance level. He emphasizes that short-term rate differentials remain the dominant driver for the pair, making EUR/USD highly sensitive to developments related to the Federal Reserve (Fed) [1].
BNY’s Wee Khoon Chong provides further context, stating that the USD has been the weakest G10 currency over the past week according to iFlow metrics, as markets have scaled back expectations for a September Fed rate hike. This underperformance is attributed to a recent employment miss and reduced odds of further tightening by the Fed. Chong notes that the market is currently positioned with low USD holdings, and the upcoming CPI release presents an asymmetric risk: a strong CPI print, especially in core services or shelter, could sharply reverse the recent repricing and lead to a significant USD rebound. Conversely, a soft or in-line CPI print would likely reinforce the current bearish positioning, keeping USD holdings low and encouraging continued outflows [2].
Both sources agree that the USD’s trajectory is closely tied to the outcome of the CPI release, with the potential for significant market moves depending on whether the data surprises to the upside or downside. The EUR/USD pair, in particular, stands to benefit from any further USD weakness, with technical levels at 1.1600 and 1.1630 highlighted as key resistance points [1][2].
Looking ahead, ING notes that the ECB has already given markets a quasi-commitment to a September hike, but with little new information expected from the Eurozone in the near term, the focus remains squarely on US data and Fed policy expectations [1]. BNY underscores the heightened sensitivity of USD positioning to the CPI outcome, suggesting that institutional flows could shift rapidly in response to the data [2].
CONCLUSION
Both ING and BNY identify the upcoming US CPI release as a pivotal event for the USD and EUR/USD exchange rate. With market expectations for a September Fed hike diminished, a softer CPI could drive further USD weakness and a potential EUR/USD breakout above 1.1600, while a strong CPI could trigger a sharp USD rebound. The market remains highly sensitive to US economic data, with significant moves likely depending on the CPI outcome.