EUR/USD Holds 1.16 as US CPI Puts 1.1641 Breakout in Focus

Key Points

• EUR/USD remains near 1.1600 after trading inside a narrow 1.1566–1.1641 range for more than a week.
• August U.S. CPI is expected to rise 3.4% annually, while core inflation is forecast to slow to 2.4%.
• The ECB raised its deposit rate by 25 basis points to 2.50% and warned inflation could remain above target for an extended period.

EUR/USD is holding close to 1.1600 on Friday, with traders reluctant to establish large positions before the August U.S. inflation report. The currency pair has spent more than a week confined to a tight range, reflecting uncertainty over the widening monetary-policy debate on both sides of the Atlantic. The European Central Bank raised interest rates Thursday, while stronger U.S. producer inflation has increased expectations that the Federal Reserve could also tighten policy. That leaves the 1.1566–1.1641 range as the immediate technical battleground.

US CPI Could Break the EUR/USD Range

The immediate catalyst is the U.S. Consumer Price Index, scheduled for release at 8:30 a.m. ET on September 11. Economists surveyed by Reuters expect headline CPI to increase 0.4% month-on-month in August, pushing annual inflation to 3.4%. Core CPI, which removes volatile food and energy prices, is expected to rise 0.2% monthly while easing to 2.4% year-on-year.

Energy is a major complication. Average U.S. gasoline prices rose to roughly $4.19 per gallon in August from $4.06 in July, while oil’s subsequent move above $100 has increased concerns that inflation could remain elevated.

Thursday’s stronger Producer Price Index already shifted expectations toward tighter Federal Reserve policy. Markets are leaning toward a 25-basis-point Fed increase at the September 15–16 meeting, although today’s CPI report could materially alter those probabilities.

A hotter CPI reading would likely support the dollar by strengthening the case for higher rates. A softer report could reduce those expectations and give EUR/USD room to challenge resistance.

ECB Raises Rates to 2.50%

The euro has its own monetary-policy support after the European Central Bank raised all three key rates by 25 basis points Thursday, taking the deposit facility rate to 2.50%. The move was the ECB’s second rate increase of 2026.

More important for the euro was the ECB’s inflation assessment. Eurozone inflation accelerated to 3.3% in August from 2.9% in July, driven largely by energy inflation of 14.3%. The central bank now forecasts headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028.

ECB President Christine Lagarde said inflation is expected to remain above the bank’s 2% objective for an extended period, but the ECB stopped short of promising another increase. Future decisions will remain data-dependent and meeting-by-meeting.

That distinction matters. Expectations for additional ECB tightening can support the euro, but stronger U.S. inflation could simultaneously increase Fed tightening expectations and strengthen the dollar.

EUR/USD Levels After Inflation Data

Technically, EUR/USD remains compressed around its 20-day exponential moving average near 1.1606. An RSI inside the 40–60 region also indicates limited directional momentum.

The first significant upside level is 1.1641, marking the upper boundary of the recent consolidation. A confirmed daily break above that level would shift attention toward the August high around 1.1711.

On the downside, 1.1566 remains the first important support. A sustained move below it would weaken the short-term structure and expose the psychological 1.1500 area.

With EUR/USD trapped inside such a narrow range, the reaction to inflation is more important than the headline number alone. Traders will be watching how CPI changes expectations for the Fed’s September decision.

Conclusion

EUR/USD is caught between two increasingly restrictive central banks. The ECB has already lifted its deposit rate to 2.50%, while persistent U.S. inflation could push the Federal Reserve toward another increase next week.

That makes 1.1641 resistance and 1.1566 support the levels that matter most. Softer U.S. inflation could weaken the dollar and give EUR/USD an opportunity to challenge 1.1711. A stronger reading would reinforce Fed tightening expectations and increase the probability of a break toward 1.1500.

Until one side of the current range gives way, U.S. inflation—not recent sideways price action—is likely to determine EUR/USD’s next meaningful direction.