EUR/USD Weekly Outlook: Inflation Data and ECB Meeting Ahead

Market Overview

EUR/USD faces significant volatility in the coming week, with traders monitoring critical U.S. inflation data and the upcoming European Central Bank (ECB) policy meeting. The pair recently experienced a sharp decline following strong U.S. labor market data and resilient ISM manufacturing and services reports, which bolstered the greenback.

U.S. Inflation Data in Focus

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The U.S. May Consumer Price Index (CPI) report, scheduled for Wednesday, June 10, will be a key determinant for market sentiment. While headline CPI is expected to climb to 4.2% year-over-year, market focus remains centered on core CPI, with analysts anticipating a rise to 2.9%. A core reading exceeding 3.0% would likely intensify hawkish expectations for Federal Reserve policy, favoring further dollar strength.

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Producer Price Index and Economic Pressure

On Thursday, June 11, the U.S. will release May Producer Price Index (PPI) data. Given the recent surge in ISM services price sub-indices, expectations suggest an acceleration in the PPI to 6.8% year-over-year. A significant increase in the core PPI component would suggest that broader price pressures are becoming entrenched, potentially placing downward pressure on EUR/USD.

ECB Policy Expectations

The ECB meeting on June 11 is widely expected to result in a 25-basis-point rate hike, a move already largely priced into the market. The primary focus for investors will be the guidance provided by President Christine Lagarde regarding future policy. Signals of a "dovish hike" or a one-time precautionary measure may undermine the euro, particularly given the recent downward revision of Eurozone GDP, which contracted by 0.2% in the first quarter.

Technical Analysis and Outlook

Technically, the bearish trend persists, with the pair trading below key Ichimoku lines on the daily chart. Support at 1.1530 is a critical level to monitor; a sustained break below this point could open the way for targets at 1.1500 and, in the medium term, 1.1430. Short positions remain favored as the fundamental backdrop currently emphasizes potential for further downside.

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