EUR/USD faces slight selling pressure but holds a majority of intraday gains near 1.0900 in Friday’s American session. The major currency pair holds gains as the US Dollar (USD) rebounds after the United States (US) Producer Price Index (PPI) report showed that producer inflation grew at a faster-than-expected pace in June. The report showed that annual core PPI, which excludes volatile food and energy prices, rose strongly by 3.0% from the estimates of 2.5% and the former release of 2.3%. On month, core PPI grew at a robust pace of 0.4% from the consensus of 0.2% and the prior reading of 0.3%, upwardly revised from an unchanged position.

On the contrary, consumer inflation for June decelearted at a faster than expeced pace in June. The situation of hotter-than-expected producer inflation and softer-than-projected consumer inflation would jeopardize market speculation for the Federal Reserve (Fed) to begin reducing interest rates from the September meeting.

According to the CME FedWatch tool, the central bank is certain to cut interest rates in September and is also expected to deliver a subsequent rate cut in the November or December meeting. The expectations for Fed rate cuts have been prompted by the United States (US) Consumer Price Index (CPI) data for June, published on Thursday, which indicated that the disinflation process has resumed after a hiatus in the first quarter of this year.

On Thursday, the CPI report showed that annual core inflation, which is generally considered by Fed officials for decision-making on interest rates as it excludes volatile food and energy items, unexpectedly decelerated to 3.3%. Economists expected the underlying inflation to have increased steadily by 3.4%. The headline inflation rose to 3.0%, the lowest reading in a year, due to easing energy prices and rentals. Monthly headline inflation deflated by 0.1% after remaining unchanged in May.

Cooling US inflationary pressures and easing labor market conditions increased Fed officials’ confidence that inflation is on course to return to the desired rate of 2%. San Francisco Fed President Mary Daly said on Thursday that a slowdown in inflationary pressures is a “welcome relief” and bolsters the case for lower interest rates. However, the timing remains a matter of debate, Reuters reported.

Daily digest market movers: EUR/USD remains firm as ECB hesitates to provide a specific rate-cut path

• EUR/USD holds gains near 1.0900 as fears of a financial crisis in the Eurozone’s second-largest nation diminished and easing expectations of subsequent interest rate cuts by the European Central Bank (ECB) next week have improved the Euro’s outlook.
• Immediate risks of a widening financial crisis in France have waned as Marine Le Pen’s far-right National Rally failed to maintain dominance over other parties. Economists were worried that the far right could boost fiscal spending if it came into power. However, uncertainty over the new fiscal policy framework remains high due to the expected coalition of French President Emmanuel Macron's centrist alliance and the left wing, also known as the New Popular Front, led by Jean-Luc Mélenchon.
• Meanwhile, expectations for the ECB's subsequent rate cuts have diminished as officials see price pressures remaining close to their current levels for the entire year. ECB policymakers have refrained from committing a pre-defined rate-cut path as they worry that an aggressive policy expansion could revamp price pressures again.

Technical Analysis: EUR/USD hovers near 1.0900

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EUR/USD gathers strength to deliver a breakout of the Symmetrical Triangle formation on the daily timeframe. The major currency pair hovers near the downward-sloping border of the above-mentioned chart pattern around 1.0880, which is plotted from the March 8 high at 1.0980. The upward-sloping border of the triangle formation is marked from the April 16 low around 1.0620.

Advancing 20-day Exponential Moving Average (EMA) near 1.0800 suggests that the near-term trend is bullish.

The 14-day Relative Strength Index (RSI) establishes into the bullish range of 60.00-80.00, indicating that momentum has leaned to the upside.

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