The EUR/USD currency pair remained stable, trading around 1.1625 during early European hours on Tuesday, as market participants adopted a cautious stance ahead of two major events: the release of US inflation data and the European Central Bank (ECB) interest rate decision later in the week [1]. Last week’s US Nonfarm Payrolls (NFP) report showed the economy added 162,000 jobs in August, surpassing the forecasted 56,000, while the Unemployment Rate held steady at 4.1% [1]. This stronger-than-expected jobs data has led traders to price in nearly a 60% probability of a Federal Reserve rate hike this month [1].
Attention is now focused on the upcoming US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data, with economists expecting a slight monthly acceleration in August, primarily due to global energy pressures [1]. Any indication of higher-than-expected inflation could strengthen the US dollar and pose a challenge for the EUR/USD pair [1].
On the European side, the ECB is widely anticipated to raise its benchmark rates for the second time this year at its Thursday meeting, following its first hike since 2023 in June and a pause in July [1]. Andrew Kenningham, chief Europe economist at Capital Economics, stated, "The ECB governing council looks certain to raise its deposit rate from 2.25 percent to 2.5 percent" [1]. Deutsche Bank also highlighted the ECB policy decision as the "key event" for Eurozone markets, expecting a 25 basis point rate increase to 2.50% and suggesting that investors will closely monitor any guidance on further tightening [1]. Deutsche Bank’s economists now anticipate an additional hike in December and have upgraded their medium-term Euro Area growth forecasts for 2026 and 2027 by 0.3 percentage points and 0.1 percentage points, respectively, to 0.8% and 1.2% [1].
From a technical perspective, EUR/USD maintains a mild bullish bias, trading above both the 20-day Bollinger simple moving average and the 100-day moving average, indicating underlying dip-buying interest [1]. The Relative Strength Index (14) is in the mid-50s, suggesting positive but not overstretched momentum [1]. Immediate resistance is noted at the upper Bollinger band around 1.1710, with a sustained break above this level potentially leading to further gains [1].
CONCLUSION
Markets are in a holding pattern as traders await critical US inflation data and the ECB’s rate decision, both of which could set the near-term direction for EUR/USD. The consensus expectation is for a 25 basis point ECB rate hike, with further tightening possible later in the year. Technical indicators suggest a cautiously positive outlook for the euro, contingent on upcoming data and central bank guidance.