12/08/26

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Major currency pairs remained confined to familiar ranges on Wednesday as investors avoided large directional bets ahead of the US July Consumer Price Index report. The cautious tone helped the dollar hold its ground on Tuesday, and the US Dollar Index edged slightly higher in early European trade while remaining below 100. US stock futures were little changed after Wall Street ended the previous session in negative territory.

Markets are looking for annual CPI inflation to ease to 3.4% in July from 3.5% in June, while core prices are expected to rise 0.2% month on month. Analysts say the bar for a meaningful shift in Federal Reserve policy expectations remains high. A stronger core reading would be needed to revive speculation about a September rate increase, while a result near consensus would likely leave the outlook little changed. In that setting, the dollar is expected to stay rangebound, supported by a generally constructive risk backdrop that continues to favor carry trades.

Oil markets remain an important variable for both inflation and broader sentiment. Crude prices have eased at times on hopes that shipping through the Strait of Hormuz could normalize, but the lack of a clear agreement has kept expectations cautious. The US Energy Information Administration has raised its forecast for average WTI crude in 2026 to $81 from $76, underlining the likelihood that energy prices may remain a source of inflation pressure.

There are still conflicting signals around the Strait of Hormuz, with progress in negotiations not yet translating into a durable solution for shipping. Lower energy prices in July should help soften headline inflation, but the recent rebound in oil suggests that energy costs could again support price growth in the months ahead.

In currency markets, EUR/USD remained sideways below 1.1550 after ending Tuesday little changed. Germany’s annual consumer inflation rate was confirmed at 2.8% in July. GBP/USD held near 1.3500, while AUD/USD traded in consolidation around 0.7050 after modest gains on Tuesday following the Reserve Bank of Australia’s policy announcement.

Gold moved back toward $4,400 in Wednesday’s European session after briefly reaching a two-month high above $4,430 on Tuesday before closing with small losses.