The euro (EUR) is consolidating its recent gains against the US dollar (USD), drifting toward the 1.15 level following a rally driven by the Federal Reserve's actions, according to Scotiabank's FX team [1]. The EUR is currently down 0.2% versus the USD, with the movement attributed to a slight fade of this week's rally [1]. The preliminary euro area Consumer Price Index (CPI) release for July was broadly in line with expectations, with the headline figure at 2.9% year-over-year and core CPI at 2.5% year-over-year, compared to the expected 2.4% [1].
French CPI data, released earlier, provided a modest and brief lift to the euro as the figures exceeded expectations, but this impact was short-lived as broader market themes prevailed [1]. Comments from the European Central Bank (ECB) have been limited, and there are no scheduled ECB speakers in the upcoming week [1].
Market rate expectations are showing signs of stabilization after a recent pullback, with approximately 22 basis points of tightening priced in for September and a cumulative 42 basis points expected by December [1]. The two-year yield spread between Germany and the US remains well supported, and Scotiabank's fair-value estimate for EUR/USD is in the mid-1.15s, with a near-term trading range anticipated between 1.1450 and 1.1550 [1].
Technical indicators suggest a bullish outlook, with the Relative Strength Index (RSI) remaining in the upper 50s after a strong reversal from oversold levels in late June. The 50-day moving average at 1.1482 has been surpassed, and the daily chart shows little resistance ahead of the 1.16 level [1].
CONCLUSION
The euro is consolidating near the mid-1.15s against the US dollar, supported by stable rate expectations and technical indicators pointing to a bullish trend. Market participants are watching for further developments, but with limited ECB commentary and data largely in line with expectations, the EUR/USD is expected to remain range-bound in the near term.