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Euro climbs to $1.1748 But then waves it away US inflation reshuffles FX

Both sides of the Atlantic had something to offer Thursday so the pair wouldn’t get bored (or boring). Now, it’s up to euro bulls to keep it going.

🔥 Euro Challenged at Current Prices

The EURUSD pair was trading above the $1.17 handle early Friday after an eventful stretch from the past day had bulls excited. News releases on both sides sandwiched the exchange rate but the second batch of data decided the winner. First, the euro slipped on Thursday after the European Central Bank decided it will keep interest rates flat at the current 2% level. No surprises there – it was all expected. The announcement came with projections of lower inflation to the tune of sub-2%, or under the central bank’s target. Why was that bearish for the euro? No real need for any rate cuts any time soon.

🎁 Inflation Lands as Expected

The US side of things followed right up with its own upbeat data. Consumer prices for August gained but actually remained within the appropriate growth range. With a 2.9% annual increase, the CPI showed the fourth month of advancing price pressures. However, traders were happy to see the figure because it came just as analysts had expected. So all good? Not exactly, it’s way above the Fed’s 2% target. But it was good enough to convince market participants an interest rate cut is all but baked in now. Heading into next week, the Federal Reserve will get together to announce its interest rate decision. By the looks of it, everyone’s looking for that juicy cut to borrowing costs in the 25-basis-point neighborhood.

👀 What to Look Out for?

What happens if we do get there? Brace for volatility. The buildup for that potential cut has been huge and there’s a high chance things could quickly turn into the classic ‘buy the rumor, sell the news’ scenario. For the euro bulls to keep the trend going, they’ll need to take out the immediate resistance at the most recent high of just under $1.18. Earlier today, the euro-dollar hit a session high of $1.1748 but then pared back the gains and turned negative on the day. Long-term outlook? The bullish trend appears somewhat on shaky grounds with the last few daily candles barely holding above the short-term 50-day moving average.