EUR/USD Holds Near 1.1535 as Flat US PPI Supports Fed Pause Bets

Key Takeaways

• EUR/USD traded near 1.1535, while the US Dollar Index held around 99.90.
• US producer prices were unchanged in July, reducing expectations of a Federal Reserve rate increase in September.
• Immediate EUR/USD support sits around 1.1500–1.1520, while resistance is concentrated near 1.1565–1.1569.

EUR/USD Price Holds Within a Narrow Trading Range

EUR/USD was trading around 1.1535 on Friday morning, up slightly from Thursday’s close near 1.1528. The pair’s early-session range remained particularly tight, reflecting limited conviction among both euro buyers and dollar bulls.

source: tradingeconomics

The exchange rate has spent most of August fluctuating around the 1.15 level. Attempts to move higher have repeatedly encountered resistance near 1.1560–1.1580, while declines towards 1.1500 have continued to attract buying interest.

The dollar was also broadly stable against other major currencies. The US Dollar Index hovered near 99.90 after briefly falling following the producer inflation report. The limited reaction suggests that much of the shift towards a September Federal Reserve pause may already be reflected in currency prices.

Current market data showed EUR/USD at approximately 1.1535, representing a daily gain of about 0.06%. The pair nevertheless remained lower by roughly 1.4% over the previous 12 months.

Soft US PPI Reinforces September Fed Pause Expectations

The latest US Producer Price Index provided additional evidence that inflation pressure may be gradually easing.

Producer prices were unchanged in July after declining by a revised 0.1% in June. The result was weaker than expectations for a 0.2% monthly increase. Final-demand goods prices dropped 0.7%, helped by a 3.1% decline in energy costs, while services prices increased by 0.2%.

Annual producer inflation slowed to 4.7% from 5.5% in June. However, prices excluding food, energy and trade services rose 0.4% during the month, showing that underlying inflation has not disappeared entirely.

The PPI report followed Wednesday’s consumer inflation figures. Headline CPI increased by 0.1% in July and 3.4% from a year earlier, while core inflation rose by 0.2% monthly and 2.5% annually. Both annual rates slowed from June.

Together, the CPI and PPI reports reduced concerns that the Federal Reserve would need to raise interest rates again immediately. Futures pricing indicated a roughly 35% probability of a September rate increase, implying that markets viewed an unchanged decision as the more likely outcome.

The Fed currently holds its benchmark rate within a range of 3.50%–3.75%. Although inflation remains above the central bank’s 2% objective, signs of cooling price growth and July’s unexpected employment decline provide policymakers with more room to wait for additional data.

For EUR/USD, a lower probability of higher US interest rates limits the dollar’s yield advantage. However, because markets are considering a pause rather than an immediate rate cut, the effect on the dollar has remained moderate.

Oil Prices Fall More Than 2% but Geopolitical Risks Remain

Lower oil prices offered another source of support for the euro. Brent crude fell 2.15% to settle at $87.07 per barrel on Thursday, while WTI declined 2.4% to $81.25.

The decline followed a sharp 17.4-million-barrel increase in US crude inventories, alongside weaker global demand projections. Lower energy prices can reduce future inflation pressure, particularly in the United States and Europe, and may lessen the need for further monetary tightening.

The eurozone is also a large net importer of energy. A sustained decline in oil and gas prices can improve the region’s trade balance and reduce costs for businesses and households, potentially offering support to the euro.

Nevertheless, oil prices remain sensitive to developments involving the United States, Iran and the Strait of Hormuz. Reports of attacks on regional energy infrastructure have periodically renewed supply concerns and supported safe-haven demand for the dollar.

This creates competing pressures for EUR/USD. Lower oil prices may weaken the dollar by reducing inflation and rate-hike expectations, while renewed geopolitical escalation could strengthen the greenback through safe-haven flows.

Eurozone GDP and US Retail Sales Take Centre Stage

Traders will next focus on updated eurozone second-quarter GDP and employment figures.

Eurostat’s preliminary estimate showed that euro-area GDP expanded by 0.4% quarter-on-quarter and 1.0% year-on-year in the second quarter. This marked an improvement from flat quarterly growth during the first three months of 2026. The August 14 publication is the updated 45-day flash estimate rather than the initial estimate, which was released on July 30.

An upward revision could strengthen the euro by showing that the regional economy is coping with elevated energy costs and tighter financial conditions. A downward revision, particularly if accompanied by weak employment growth, could reinforce concerns about the eurozone’s economic outlook.

US July retail sales will be released later on Friday. The report will offer a clearer indication of whether American consumers remain resilient after recent signs of labour-market weakness. The release is scheduled for 8:30 a.m. Eastern Time.

Stronger-than-expected retail sales could revive expectations of a September Fed increase and lift the dollar. A weak result may further support the case for unchanged rates, potentially allowing EUR/USD to challenge nearby resistance.

Conclusion

EUR/USD remains stable near 1.1535 as softer US CPI and PPI readings strengthen expectations that the Federal Reserve will leave interest rates unchanged in September. Falling oil prices are also helping to ease inflation concerns, although US-Iran tensions continue to create periodic safe-haven demand for the dollar.

Friday’s updated eurozone GDP figures and US retail sales report may determine whether the pair can break above 1.1569 or fall below the 1.1500 support area. Until then, EUR/USD is likely to remain confined within its recent low-volatility range.