FX.co ★ Risk appetite returns as inflationary pressure ease in the US

Euro is likely to rise as risk appetite will surge if inflationary pressure in the US eases. The lower figure will also affect the Federal Reserve, weakening its grip on rate increases. Recently, US Treasury Secretary Janet Yellen expressed optimism for a slowdown in inflation, but warned that uncertainty remains.

The core CPI for August is expected to show growth, while the overall index is likely to slow to 8.1%.

Inflation has been a major concern for the Biden administration as high gas and food prices earlier in the year have seriously undermined the president's popularity and the Democrats' prospects for maintaining control of Congress.

Also, in response to high price increases, the Federal Reserve has been raising interest rates rapidly. They hope that such a move will curb further price hike as quickly as possible, so there were several increases of 75 basis points at once at the past meetings, and the same is expected in September. But even if inflation slows in August, the Fed is unlikely to step back from its mandate as the central bank intends to do whatever it takes to bring inflation under control.

Talking about EUR/USD, there are chances for a further recovery, but only in the event that inflation eases in the US. If the opposite happens, euro will decline, and buyers will have to cling to 1.0100 in order to bring back the possibility of a rally. The nearest target will be resistance level of 1.0150, the breakdown of which will open a direct path to 1.0190 and 1.0240. The farthest target will be the level of 1.0270. In case of a further decrease and breakdown of 1.0100, sellers will become more active in the market, which could push the quote to 1.0030 and 1.0000

In terms of GBP/USD, a lot depends on the 17th figure as its breakdown creates a pretty good chance for a larger upward correction. That will open a direct route to the highs at 1.1750 and 1.1790. The farthest target will be 1.1840. But if pressure on the pair returns, buyers will have to do everything to stay above 1.1660, otherwise, there will be another major sell-off towards the level of 1.16130. Its breakdown will open a direct path to 1.1580 and 1.1550.