EUR/USD sustains above 1.1000 as USD Index continues losing streak, US Inflation eyed

• EUR/USD is sustaining auction confidently above 1.1000 amid a vertical sell-off in the USD Index.
• The US Dollar Index is under severe pressure as July’s interest rate hike by the Fed could be the last nail in the coffin.
• Inflationary pressures in the German economy are significantly higher than other nations of the old continent.

The EUR/USD pair is maintaining an auction comfortably above the psychological resistance of 1.1000 in the Asian session. The major currency pair has got immense strength as the US Dollar Index (DXY) has continued its three-day losing spell.

S&P500 futures have added nominal gains in Tokyo. US equities were decently bought on Monday, portraying upbeat market sentiment. The USD Index has refreshed its two-month low at 101.74 despite the chances of one more interest rate hike from the Federal Reserve (Fed) in July being resilient. As per the CME Fedwatch tool, more than 92% chances are in favor of a 25 basis point (bp) interest rate hike, which will push rates to 5.25-5.50%.

The US Dollar Index is under severe pressure as July’s interest rate hike by Fed chair Jerome Powell could be the last nail in the coffin as tight labor market conditions are releasing heat and inflationary pressures are softening consistently.

Going forward, Wednesday’s United States Consumer Price Index (CPI) data will be keenly watched. As per the preliminary report, monthly headline CPI delivered a higher pace of 0.3% vs. the former pace of 0.1%. Also, core inflation that excludes oil and food prices is expected to match the headline CPI pace.

On the Eurozone front, investors are awaiting the final reading of German inflation data. Inflationary pressures in the German economy are significantly higher than other nations of the old continent, which will keep the odds of further policy-tightening by the European Central Bank (ECB) healthy.

ECB Governing Council member Francois Villeroy de Galhau said over the weekend, “Eurozone rates will soon reach their high point, but it will be more of a high plateau than a peak.”