EUR/USD within tight range with US CPI, Fed meeting in focus

The EUR/USD currency pair remained stuck in a narrow trading range on Wednesday ahead of the outcome of the Federal Reserve’s two-day policy meeting and the release of US CPI inflation figures for May.

The Fed is widely expected to leave its federal funds rate target range without change at a 23-year high of 5.25%-5.50% for the seventh straight policy meeting in June.

Therefore, the focus will likely be on the central bank’s updated economic projections along with Fed Chair Jerome Powell’s press conference for clues over the timing of potential rate cuts.

The robust US employment growth, reported last week, suggested that inflation probably remained sticky, prompting investors to pare bets the Federal Reserve will likely cut interest rates in the upcoming months.

Markets are now pricing in about a 56% chance of a Fed rate cut occurring in September, compared with a 78% chance a week ago, according to the CME FedWatch tool.

A few hours before the Fed’s decision, market players will have the opportunity to look into the latest US CPI data.

Annual headline consumer inflation in the United States probably steadied at 3.4% in May, according to market consensus.

Annual core CPI inflation probably eased to 3.5% in May from 3.6% in April – a three-year low.

Meanwhile, in other macro data, Germany’s annual CPI inflation was confirmed at 2.4% in May, up from a three-year low of 2.2% in April and March, fueled by higher cost of services and food items.

Currency Pair Performance

As of 7:45 GMT on Wednesday the EUR/USD currency pair was inching up 0.02% to trade at 1.0743.

The major Forex pair was hovering just above a 6-week low of 1.0719, which it registered on Tuesday.