• EUR/USD holds key support of 1.0900 with US inflation data in focus.
• Both US annual headline and core inflation are expected to have decelerated slightly in July.
• The ECB is expected to deliver two more interest-rate cuts this year.

EUR/USD stays in a tight range above the round-level support of 1.0900 in Monday’s European session. The major currency pair struggles for direction as investors look for fresh cues at the start of a busy data week that will likely indicate how much the Federal Reserve (Fed) will cut interest rates in September. 

For fresh interest rate cues, investors mainly await the United States (US) Consumer Price Index (CPI) data for July, which will be published on Wednesday. Economists expect that monthly headline and core inflation, which strips off volatile food and energy prices, rose by 0.2%. Annual headline and core CPI are estimated to have decelerated by one-tenth to 2.9% and 3.2%, respectively.

Currently, the Fed is widely anticipated to start reducing its key borrowing rates in September as Fed policymakers seem to have become confident that price pressures are on track to return to the desired rate of 2%. Also, officials have acknowledged that downside risks have now emerged for the labor market.

According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that traders see a 46.5% chance that interest rates will be reduced by 50 basis points (bps) in September, significantly from the 85% recorded a week ago. The expectations for a big Fed rate-cut have waned as fears of potential US recession have eased.