EUR/USD consolidated recent losses on Friday as inflation figures from the euro zone and U.S. led to minimal changes in the policy outlook for the ECB and the Federal Reserve.
Both central banks are expected to cut rates next month, though, it is a question of how much in the U.S., given market pricing attaches about a 30% probability of a 50bps move.

In recent weeks, central bankers have been taking somewhat of a victory lap, now that their confidence in returning inflation sustainably to target has increased.
With that said, more emphasis will be placed on activity data going forward and thus will have larger implications for monetary policy and by extension, FX markets.

Unfortunately for the euro, economic data continues to broadly surprise on the downside and while this will have little bearing on the September meeting, the door is open to an October rate cut 0#ECBWATCH.

In the immediate future, incoming U.S. activity data -- such as ISM, PMIs and payrolls -- may have a bigger say on the euro’s fortunes.
Thus, if U.S. data holds up, whether that is in-line with expectations or an upside surprise, this would likely be enough to price out a 50bps rate cut, prompting to deeper setback for EUR/USD.

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