Ella 
EUR/USD struggled to rise and remained below 1.0750 in early European trading. Markets turned cautious ahead of key U.S. inflation data during the North American session. The pair is currently trading around 1.0745, down 0.07% on the day.
The European Central Bank (ECB) expects inflation in the euro zone to remain above 3% next year, Reuters reported, providing support for a tenth consecutive interest rate hike on Thursday. Market participants are divided on the ECB’s interest rate expectations, with about 40% of investors expecting the ECB to raise rates at Thursday’s meeting. Still, if the unconfirmed ECB disclosures are accurate, the ECB is likely to announce another rate hike this week. This in turn could boost EUR/USD.
EUR/USD gains may be limited as investors tend to wait and see ahead of Wednesday’s CPI announcement. The focus on Wednesday will be U.S. CPI in August. The annual rate is expected to rise from 3.2% to 3.6%. The annual core CPI rate is expected to fall to 4.4% from 4.7%. The data could trigger volatility in the pair and influence the Fed’s monetary policy expectations.
Additionally, the prospect of higher interest rates from the Federal Reserve in the longer term could support the dollar. According to CME Group’s FedWatch tool, investors expect a 93% chance that the Fed will keep interest rates unchanged at 5.25%-5.50% in September. At the same time, the market has priced in a 40.8% probability of a rate hike by the Federal Reserve at its November meeting.
Later in the day, investors will keep a close eye on euro zone industrial output and U.S. August CPI. Focus will turn to the European Central Bank’s interest rate decision and U.S. retail sales on Thursday. This event may guide EUR/USD.
