Buying EURUSD amid expectations of weaker US inflation report

At present, there is nearly a 99% chance of a Fed rate cut next Wednesday, especially after an unexpected drop in the Producer Price Index (PPI) for August and a slowdown in US job growth. Key questions are how aggressive the regulator’s move will be and what comments its officials will give regarding further borrowing cost reductions this year. These questions will gain extra importance depending on today’s inflation report. According to the CME FedWatch tool data, markets had previously priced in a 90% likelihood of a 25-basis-point rate cut next week. However, in recent days, the probability of a more significant 50-basis-point reduction has noticeably increased, especially after a preliminary benchmark revision showed that the American economy created 911,000 fewer jobs in the twelve months through March 2025 than originally reported.

Economists expect the annual Consumer Price Index (CPI) to rise to 2.9% in August from 2.7% in July, given the monthly increase of 0.3%. The core CPI, excluding volatile food and energy costs, is likely to remain unchanged—at 3.1% year-on-year and 0.3% month-on-month.

Deteriorating conditions in the US labor market typically put pressure on consumer demand and, consequently, push prices down. But now there are concerns that the country could face both stagnant economic growth and rising inflation, which will be harder to overcome if the central bank cuts rates next Wednesday. The CPI report has been raising more and more worries because of increasing tariff pressure on goods and services. That said, the likelihood of a 50-basis-point rate cut by the Fed in September could surge if today's data turns out to be more tepid.

Any US dollar gains in the Forex after the release of better-than-forecast inflation data should be nullified given investors' growing anxiety about the state of the labor market. Fewer rate cuts in 2025 due to the Federal Open Market Committee's concerns about consumer prices are likely to prompt market participants to expect more reductions next year as a retaliatory measure.

In summary, if the US CPI report is subdued, the EURUSD currency pair will gain support and upward momentum.

The overall recommendation is to buy EURUSD if the US inflation meets market expectations or comes in below them. Profits should be taken at the level of 1.1760. Stop Loss could be set at 1.1670.

The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.