EUR/USD Hovers Around 1.0850, With Focus On Eurozone Inflation And Fed Policy Decision

During the European session on Monday, the EURUSD fluctuated in a narrow range around 1.0850. Ahead of the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for July and the release of the Federal Reserve’s (FED) monetary policy statement on Wednesday, investors are waiting and watching as the exchange rate struggles to find direction.

Euro zone inflation data will indicate whether market expectations for two more interest rate cuts from the European Central Bank (ECB) this year are appropriate. Some ECB policymakers are comfortable with speculation of two more rate cuts amid a gloomy economic outlook and believe price pressures are expected to return to a desirable level of 2% next year.

German Finance Minister Christian Lindner acknowledged slowing demand in the euro zone’s largest country and announced tax cuts for companies and households to stimulate spending and investment.

Excluding volatile items such as food, energy, alcohol and tobacco, headline and core HICP annual growth rates are estimated to fall to 2.3% and 2.8% respectively.

Ahead of the euro zone inflation data, investors will focus on the euro zone’s preliminary second-quarter gross domestic product (GDP) data released on Tuesday, as well as inflation data from Germany and Spain.

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