EUR/USD remains on the defensive above the 1.0700 mark, US CPI, ECB rate decisions eyed

The EUR/USD pair struggles to gain following the choppy action on Friday. The major hovers around 1.0710 during the early Asian session on Monday. The US Dollar (USD) snapped its eighth-week winning streak on Friday as the markets turned cautious ahead of the key inflation figure this week. Meanwhile, the US Dollar Index (DXY) holds below the 105.00 mark, down 0.14% on the day. 
 
The upbeat US data last week might convince the Federal Reserve (Fed) to maintain the interest rate in the September meeting, but markets expected one more 25 basis points (bps) rate hike by the end of the year. According to the CME FedWatch Tool, markets have priced in a 93% possibility of holding the interest rate at the September meeting, while the odds of a rate hike in the November meeting are around 43.5%. 

About the data, the US Initial Jobless Claims totaled 216,000 in the week ending September 2. This figure came in better than the market consensus of 234,000 and followed the previous week's revised figure of 229,000 (from 228,000). Market participants will take more cues from the US Consumer Price Index (CPI) for August due on Wednesday. 

On the other hand, the data released by Destatis on Friday revealed that the German Harmonised Consumer Price Index (HICP) for August came in at 6.4% YoY, as the market expected whereas the core CPI remained unchanged at 6.1%. Additionally, the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) grew 0.1% versus 0.3% prior and below the expected at 0.3%.The Euro has a volatile session and extends its downside as investors worry about the potential recession. The discouraging data might convince the European Central Bank (ECB) to abandon its hawkish stance for the upcoming meeting.

According to a Reuters poll, the majority of economists anticipate the European Central Bank (ECB) to hold interest rates unchanged at its next policy meeting scheduled for September 14. The ECB approach is based on incoming economic data. However, the US economic data in comparison to the Eurozone increases the possibility of the Fed's "higher for longer" rate narrative. 

Looking ahead, investors will closely monitor the release of the US Consumer Price Index (CPI) for August for fresh impetus. The monthly figure is expected to rise by 0.5%, while the core monthly figure is expected to remain at 0.2%. The attention will shift to the ECB's monetary policy on Thursday. The event could give a clear direction for the EUR/USD pair.