Euro CPI ticks higher, euro lower

[Ben Graham]

The US dollar has posted sharp gains against most of the majors on Tuesday. In the North American session,EUR/USD is trading at 1.1672, down 0.33% on the day. The euro fell as smuch as 0.84% today but has recovered most of those losses after soft US manufacturing data.

Eurozone CPI ticks up to 2.1%

Eurozone inflation ticked higher in August to 2.1% y/y, up from 2.0% in July. This was just above the market estimate of 2.0%. Services inflation, which has been sticky, eased to 3.1% from 3.2%.

Core CPI, which excludes energy and food, was unchanged at 2.3% y/y for a fourth consecutive time, above the market estimate of 2.2%. The core rate remained at its lowest level since October 2021.

The calm in inflation means that the European Central Bank is likely to continue to maintain its key deposit rate at 2.0% at the September 11 meeting. Still, the ECB has its doves who favor further rate cuts in order to kick-start the weak eurozone economy. As well, the Federal Reserve is widely expected to cut rates this month, which will put pressure on the ECB to also lower rates. The central bank has inflation under control but is also concerned about inflation undershooting the 2% target.

ISM Manufacturing PMI misses forecast

The US ISM Manufacturing PMI came in at 48.7 in August, up from 48.0 in July but below the market estimate of 49.0. Manufacturing has been in the doldrums, with six straight readings below 50, which indicates contraction. There was a rebound in new orders but production and employment showed declines.

The weak global economy and the impact of counter-tariffs on US goods continues to dampen manufacturing activity, with little indication that the situation will improve anytime soon.

EUR/USD Technical

• EUR/USD has pushed below support at 1.1687 and is putting pressure on 1.1662. Next, there is support at 1.1638
• There is resistance at 1.1711 and 1.1736

EURUSD 1-Day Chart, September 2, 2025

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