EUR/USD Supported as Soft US CPI Eases Fed Tightening Fears

EUR/USD and broader risk-sensitive pairs are benefiting from improved market sentiment following a surprisingly soft US CPI report, which has reduced expectations for additional Federal Reserve tightening. The European session ahead features only low-tier releases, including final Spanish CPI and Eurozone Industrial Production, neither of which is expected to materially shift ECB rate expectations or generate significant market reaction. The softer US inflation data has provided a notable breather for markets, encouraging positive risk sentiment and reducing dollar demand. Focus now shifts to the US session, where PPI data and Fed Chair Powell's testimony are anticipated as the next major catalysts. These events carry the potential to either reinforce or reverse the current dovish repricing of Fed policy. Traders should remain alert for volatility around Powell's remarks, which could set the tone for USD pairs through the week. In the interim, EUR/USD is expected to trade in a narrow range during European hours, with directional conviction likely deferred to US session developments.