After losing more than 100 pips on Thursday, the EUR/USD currency pair has failed to produce a major recovery. The pair remains within touching distance of 1.0600 early Friday, and a hot inflation report from the US might force it to lose more ground before the weekend.

Following the June policy meeting, the European Central Bank (ECB) maintained policy rates unchanged, as expected. The bank announced plans to raise rates by 25 basis points in July. Concerning potential rate rises, the ECB refrained from committing to a 50 basis point hike in September, causing the common currency to lose interest. Furthermore, the bank reduced its growth predictions for 2022 and 2023 to 2.8 percent and 2.1 percent, from 3.7 percent and 2.8 percent, respectively.

The US Bureau of Labor Statistics will issue the consumer price index (CPI) data later in the day. The CPI is predicted to remain unchanged at 8.3 percent year on year in May. The Core CPI, which excludes volatile food and energy costs, might fall to 5.9 percent in May, down from 6.2 percent in April.

Given the ECB’s reluctance, higher-than-expected CPI numbers could remind investors of the ECB’s policy divergence with the Fed, causing the EUR/USD to fall further. A moderate inflation report, on the other hand, should encourage investors to book profits ahead of the weekend, allowing the EUR/USD to recover.

Conclusion

The euro is under pressure from capital outflows as investors seek greater potential security in the United States.