EUR/USD steady ahead of FOMC minutes as Danske Bank remains bearish

The EUR/USD pair is little changed today as investors react to the mild inflation data from the Eurozone. They are also waiting for the Federal Open Market Committee (FOMC) minutes that will come out at 18:00 GMT.

Eurozone inflation slows

Consumer prices declined slightly in July as the bloc continued to reopen. According to the Eurostat, the headline consumer price index (CPI) rose by 0.4% in July. That was slightly better than the previous increase of 0.3%. On a month-on-month basis, the CPI declined by 0.4% after rising by 0.3% in the previous month.

The core CPI, which excludes the volatile food and energy products, rose by 1.2% in July from the previous 0.8%. On a MoM basis, the price fell by 0.3%. Meanwhile, without tobacco, the CPI rose by 0.2%.

According to the bureau, Greece, Cyprus, and Estonia recorded the lowest annual rates of -2.1%, -2.0%, and -1.3%, respectively. The best-performing countries were Hungary, Poland, and Czechia.

By category, the biggest contributor to consumer prices were non-energy industrial goods followed by food, alcohol, and tobacco.

In recent months, economic data from Europe has been relatively strong. For example, the unemployment rate has been relatively strong at about 7.8%, which is better than the 10.1% in the United States. Industrial production increased by 9.1% while manufacturing and services PMIs were better than expected.

Separately, data released earlier today showed that the headline CPI in the UK rose by 1.0% while the core CPI increased by 1.8%. The closely-watched retail price index rose by 1.6% while the core RPI rose by 1.9%.

EUR/USD pauses ahead of Fed

The EUR/USD pair is also reacting to the upcoming minutes by the FOMC. The minutes will provide more colour about the latest action by the Fed. They will also provide more information on how the committee members deliberated on their decision. In the Fed meeting, the bank left interest rate unchanged and pledged to continue supporting the economy.

Still, there are several risks for the US economy. The biggest one is that the White House, Republicans, and Democrats have disagreed on stimulus. In a statement, analysts at Danske Bank said:

“While there is clearly a risk that mere momentum and elevated volatility may take the spot even higher, we increasingly see risks in the cross to the downside as the consensus story could be rewritten in coming months in favour of USD.”

EUR/USD technical outlook

The EUR/USD pair rose to an intraday high of 1.1963, which is the highest it has been in more than two years. As it rose, the price rose above the previous resistance at 1.1910. The price is above the 50-day and 100-day exponential moving averages. It is also above the ascending trend line that is shown in black. Therefore, the price is likely to continue rising in the short term as bulls attempt to test the important resistance at 1.2000.