EUR/USD Price Forecast: 1.1686-1.1710 zone remains key hurdle

The Euro (EUR) recedes from its initial gains and stabilizes around 1.1625 against the US Dollar (USD) in the European trading session on Wednesday. Simultaneously, the US Dollar strengthens as it recovers from its earlier declines. At the moment, the US Dollar Index (DXY), which measures the Dollar's value against six key currencies, remains steady around 98.82.

Financial markets anticipate that the US Dollar's future will largely depend on the United States Consumer Price Index (CPI) data for August, set to be released on Friday. TD Securities predicts that the upcoming CPI report will indicate that price pressures are still under control, with core inflation likely increasing by 0.19% month-over-month (2.3% year-over-year).

Strategists emphasize that services will likely drive the inflation, while core goods prices may act as a decelerator with a slight monthly decline. The headline CPI is anticipated to show a stronger 0.37% month-over-month (3.4% year-over-year) increase due to higher energy prices and a modest uptick in food inflation. This inflation data is expected to heavily influence the Federal Reserve's (Fed) monetary policy decisions.

Currently, the CME FedWatch tool indicates a 60% chance that the Fed will raise interest rates in the September meeting. Meanwhile, the Euro is projected to trade in a relatively narrow range before the European Central Bank (ECB) monetary policy announcement on Thursday. ECB officials are widely expected to raise interest rates by 25 basis points (bps) during the meeting, while maintaining a relatively hawkish stance to tackle potential energy-led inflation and curb any broader inflationary risks.