EUR/USD: CPI, Warsh Testimony, and Geopolitical Risks Shape Near-Term Outlook

EUR/USD trades near 1.0850 amid mixed signals from US CPI data, Fed testimony, and global inflation risks. Key factors include Taiwan's inflation pressures, Middle East tensions, and commodity weakness impacting USD strength.

EUR/USD remains range-bound near 1.0850, influenced by conflicting macroeconomic narratives. The USD faces pressure from elevated yields and geopolitical risks, while EUR benefits from European inflation moderation. Recent commodity weakness (gold, silver) and central bank policy cues are critical for directional clarity.

The EUR/USD pair faces a pivotal week as the US CPI report and Fed Chair Kevin Warsh's congressional testimony test the dollar's recovery. Recent news highlights include: (1) Commerzbank's warning that Taiwan's 2.5% core CPI could push the Central Bank of China toward a 12.5 bp rate hike in H2, supporting USD strength. (2) Middle East tensions and high US yields are exacerbating IDR weakness, indirectly pressuring EUR/USD. (3) Gold and silver declines, driven by Trump's comments on the Iran ceasefire, signal risk-off sentiment favoring the dollar. However, the EUR may find support from European inflation moderation and potential rate pause expectations in the Eurozone.