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Euro Gains as Softer US PPI Fuels Fed Cut Bets; All Eyes on CPI and ECB Decision
Traders' Opinions
Summary:
The euro extended gains against the dollar after soft US PPI data reinforced Fed rate cut bets. EUR/USD trades around 1.1710, with technicals pointing higher toward 1.1730.
Buy
CLOSEDEURUSD
End Time
1.17250
Entry Price
1.18000
TP
1.16700
SL
1.17331 -0.00017 -0.01%
550
Points
Loss
1.16700
SL
1.16698
CLOSING
1.17250
Entry Price
1.18000
TP
The euro is holding modest gains against the US dollar on Wednesday, with EUR/USD hovering near six-week highs as investors trimmed dollar exposure after another round of softer US inflation data reinforced expectations that the Federal Reserve could deliver an interest rate cut as soon as next week.
At the time of writing, the common currency is trading around 1.1710, extending its climb after briefly touching its strongest level since late July in the previous session. The dollar, by contrast, remains under pressure, with the US Dollar Index (DXY) drifting lower toward 97.70, reflecting weakening momentum across major pairs.
The latest reading of the Producer Price Index (PPI) for August offered fresh evidence that inflationary pressures in the United States are losing steam. Headline PPI unexpectedly fell 0.1% month-on-month, compared with expectations for a 0.3% increase. Adding to the dovish narrative, July’s figure was revised downward to 0.7% from 0.9% previously reported.
On a yearly basis, wholesale inflation slowed sharply to 2.6%, undershooting the forecast of 3.3%. Core PPI, which strips out food and energy components, also showed weakness, slipping 0.1% MoM, with the annual pace cooling to 2.8% from 3.7%.
The softer trajectory bolsters the argument that the Fed is nearing the end of its inflation fight and may need to pivot toward easing monetary conditions to cushion growth. Markets are now pricing in a 25-basis point cut next week, though most analysts maintain that the data does not warrant a larger 50-bps move.
“The PPI miss reinforces the Fed’s case to cut next week, but the numbers aren’t disastrous enough to warrant panic,” one strategist in New York noted. “What’s critical now is whether tomorrow’s CPI confirms that disinflation is entrenched.”
The inflation debate will gain further clarity on Thursday, when the Consumer Price Index (CPI) report is published. This is the final major data release before the Fed’s highly anticipated September meeting. A cooler print could lock in expectations for a cut, while an upside surprise may complicate the picture and reintroduce uncertainty about the timing of policy easing.
In parallel, the European Central Bank (ECB) will deliver its latest monetary policy decision. Having cut rates aggressively earlier in the year to bring the deposit rate down to 2.0%, policymakers are widely expected to keep rates unchanged. With eurozone inflation stabilizing near the 2% target and wage growth showing signs of moderation, the ECB is likely to signal that its easing cycle is nearing completion.
“The ECB doesn’t have much room to maneuver now,” said a Frankfurt-based economist. “They’ve front-loaded cuts, inflation is near target, and growth risks remain. They will probably emphasize patience and data dependency going forward.”
Technical Analysis
From a technical perspective, momentum indicators are aligning in favor of further euro strength. The Super Trend indicator has flipped into a clear long signal, while Pivot Point HL is supporting a broadly bullish structure on the charts.
Immediate resistance is eyed at 1.1730, which traders see as the near-term target. A sustained break above this level could open the door toward 1.1780–1.1800, marking a potential continuation of the current rally. On the downside, support lies near 1.1690, the recommended stop-loss level for short-term traders.
The broader tone remains constructive as long as EUR/USD holds above this threshold. However, market direction in the coming days will hinge on the dual catalysts of the US CPI and ECB outcome. Any hawkish twist from the ECB or an upside CPI surprise could cap the euro’s advance, while dovish signals would strengthen the bullish case further.
TRADE RECOMMENDATION
BUY EURUSD
ENTRY PRICE: 1.1725
STOP LOSS: 1.1670
TAKE PROFIT: 1.1800
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