EUR/USD trades quietly below 1.1700 as investors await fresh cues on US-EU trade talks

EUR/USD stabilizes around 1.1670 ahead of the US CPI data for June.
The US inflation is expected to have grown at a faster pace on both a monthly and yearly basis.
The EU prepares with proportionate countermeasures if it fails to reach a deal with the US.

Sagar Dua FXStreet

The EUR/USD pair trades calmly around 1.1670 during the Asian trading session on Tuesday. The major currency pair oscillates in a limited range, with investors awaiting fresh development on trade negotiations between the United States (US) and the European Union (EU).

On Monday, US President Donald Trump confirmed that Washington is still in talks with Brussels to secure a trade pact before the August 1 deadline, despite having announced 30% tariffs on imports from the EU over the weekend.

Meanwhile, a report from Bloomberg has stated that the 27-nation trading bloc is prepared with proportionate countermeasures if it fails to ink a deal with the US in order to safeguard its interests. The report showed that the European Commission (EC) has finalized a new list of potential tariffs targeting $84 billion (€72 billion) worth of US goods, including aircraft made by Boeing Co., automobiles, bourbon, agricultural products, chemicals, and machinery.

In Tuesday’s session, the US Consumer Price Index (CPI) data for June will be the key trigger for the pair, which will be published at 12:30 GMT. Investors will pay close attention to the US inflation data as it will indicate the impact of sectoral tariffs on price pressures. The US headline inflation is estimated to have grown at a faster pace of 2.7% on year, compared to 2.4% in May. In the same period, the core CPI – which excludes volatile food and energy prices – rose at a faster pace of 3%, compared to the prior release of 2.8%. Month-on-month headline and core CPI are expected to have grown strongly by 0.3%.

Signs of price pressures accelerating would force traders to pare bets supporting interest rate cuts by the Federal Reserve (Fed) in the September policy meeting. The Fed is almost certain to leave interest rates unchanged in the 4.25%-4.50% range in the policy meeting later this month.

Economic Indicator

Consumer Price Index ex Food & Energy (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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