EUR/USD consolidates around mid-1.0800s, eyes final Eurozone CPI print for fresh impetus

• EUR/USD struggles to gain any meaningful traction and oscillates in a range on Friday.
• Bets that the Fed is done hiking rates keep the USD depressed and act as a tailwind.
• Dovish ECB expectations keep a lid on any meaningful appreciating move for the pair.

The EUR/USD pair stalls the overnight modest pullback from the 1.0900 neighbourhood, or its highest level since August 31 and oscillates in a narrow trading band during the Asian session on Friday. Spot prices currently trade around the mid-1.0800s, nearly unchanged for the day, as traders seek more clarity about the Federal Reserve's (Fed) policy outlook before placing fresh directional bets.

Against the backdrop of this week's softer US CPI report, the recent slump in Crude Oil prices boosts disinflation hopes and should bring the Fed closer to its 2% target. Adding to this, a larger-than-expected rise in the US Initial Jobless Claims pointed to signs of a cooling labour market and reaffirmed expectations that the Fed will now raise interest rates any further. This, in turn, dragged the yield on the benchmark 10-year US government bond to a near two-month low on Thursday, which continues to undermine the US Dollar (USD) and acts as a tailwind for the EUR/USD pair.

That said, the prevalent cautious mood around the equity markets helps limit the downside for the safe-haven buck. Apart from this, bets that the European Central Bank (ECB) could start cutting rates in March 2024 hold back traders from placing aggressive bullish bets around the shared currency and contribute to capping gains for the EUR/USD pair. This, in turn, makes it prudent to wait for strong follow-through buying before positioning for an extension of this week's blowout rally through the 100- and the 200-day Simple Moving Averages (SMA) confluence hurdle near the 1.0800 mark.

Market participants now look to the release of the final Eurozone CPI print for some impetus ahead of the US housing market data – Building Permits and Housing Starts – due later during the early North American session. Apart from this, traders will take cues from speeches by influential FOMC members, which, along with the US bond yields and the broader risk sentiment, will drive the USD demand and produce short-term opportunities around the EUR/USD pair. Nevertheless, spot prices remain on track to register strong weekly gains and remain at the mercy of the USD price dynamics.

Technical levels to watch