EUR/USD steady at 1.1700 as softer US PPI fuels rate cut bets

• EUR/USD trades flat around 1.1700 as softer US producer prices boost Fed rate cut expectations ahead of key CPI data.
• Risk-off reaction after Russian drones violated Poland's airspace, adding geopolitical tension to already fragile sentiment.
• Trump presses EU to impose 100% tariffs on China and India in bid to pressure Russia over Ukraine war.

The EUR/USD remains steady at around 1.1700 on Wednesday as market participants digest US economic data. US Dollar weakness triggered by a softer inflation report and growing speculation for the first rate cut by the Federal Reserve (Fed) keeps the pair trading within familiar levels.

Euro steadies as softer US PPI pressures US Dollar

The US Producer Price Index (PPI) in August was softer than projected in both headline and core prints. Despite this, the market reaction was not as dovish as expected as traders await the release of the Consumer Price Index (CPI) on Thursday and Initial Jobless Claims for the week ending September 6.

Across the pond, the economic docket was empty, yet EUR/USD traders are focused on the outcome of the European Central Bank (ECB) monetary policy meeting.

Regarding geopolitics, news that Russian drones violated Poland's airspace triggered a risk-off reaction in the pair, which ultimately turned negative.

In the meantime, US President Donald Trump asked the European Union (EU) to hit China and India with 100% tariffs in order to pressure Russian President Vladimir Putin to end the war with Ukraine.

Daily market movers: EUR/USD traders wait for US CPI figures

• US PPI growth slowed in August, easing to 2.6% YoY from 3.3%. Core PPI also moderated, coming in at 2.8% YoY versus a downwardly revised 3.5% in July. Following the release, Fed rate cut expectations shifted slightly more dovish by 1 basis point.
• The US Dollar Index (DXY), which measures the Greenback against a basket of six peers, is up 0.10% at 97.85.
• US CPI for August is projected to rise to 2.9% YoY from 2.7%, whereas Core CPI, which excludes food and energy, is expected to hold steady at 3.1%.
• Fitch Ratings Agency expects two 25-basis-point rate cuts in September and December, with three more reductions penciled in for 2026. Conversely, the ratings agency does not project any further rate cuts by the ECB.
• After the data, traders had priced in a 90% chance of the Fed easing policy by 25 bps and a 10% chance for a 50 bps cut, according to the Prime Market Terminal interest rate probability tool. The ECB is likely to keep rates unchanged, with a 93% probability of that and only a 7% chance of a 25 bps cut.

Technical outlook: EUR/USD remains bullish despite retreating to 1.1700

The EUR/USD has posted back-to-back bearish days, which has pushed the pair below the 1.1700 figure. However, strong support lies at around the confluence of the 20-day and 50-day Simple Moving Averages (SMAs) of 1.1672, and 1.1659, respectively.

The Relative Strength Index (RSI), despite being bullish, shows that buyers are losing momentum as the print fell from 60 to 52, with sellers eyeing the 50 neutral line.

If EUR/USD climbs above 1.1700, expect a move toward 1.1750, ahead of July 24 at 1.1788. A move above the latter will expose 1.1800 and 1.1829.