Euro steady after strong CPI figures

The Euro (EUR) regains the smile against the US Dollar (USD) on Wednesday, prompting EUR/USD to reclaim the area above 1.0750 in the wake of the release of US inflation figures.

On the USD-side of the equation, the Greenback gives away most of its earlier advance and revisits the 104.60 region when tracked by the USD Index (DXY) after US inflation readings showed the headline CPI rising more than estimated by 3.7% YoY in August and 4.3% YoY when it comes to the Core CPI. The knee-jerk in the Dollar also comes in tandem with a U-turn in US yields in the short end and the belly of the curve.

In terms of monetary policy, the anticipation of a potential interest rate hike by the Federal Reserve (Fed) in November seems to have waned recently, while market participants continue to factor in the likelihood of rate cuts taking place in the second quarter of 2024.

Turning our attention to the European Central Bank (ECB), market discussions seem to lean towards a pause at Thursday's meeting and an additional quarter-point rate raise by year-end, given the current state of a somewhat divided Council.

Looking at the euro docket, Industrial Production in the euro bloc contracted at a monthly 1.1% in July and 2.2% from a year earlier on Wednesday. Across the ocean, Mortgage Applications measured by MBA contracted 0.8% in the week to September 8, while the EIA’s report on crude Oil inventories are due later in the NA session.