The coming trading week promises to be volatile. The US will publish key inflation growth data, and the European Central Bank will hold its regular September meeting, determining the future fate of monetary policy. All other fundamental factors will play a secondary (supporting) role for EUR/USD.

Last Friday, the US dollar came under significant pressure following the release of August Nonfarm Payrolls. The data showed that the US labor market is not a victim of "statistical manipulation" (as previously claimed by Donald Trump) but truly cooling, and at a fast pace. This signal is reflected not only in the NFP but also in the latest JOLTS data, which revealed for the first time since 2021 that the number of unemployed exceeded job openings.

Last week's labor market reports (NFP, ADP, JOLTS, Unemployment Claims) suggest the Federal Reserve will not stop at a single 25-basis point rate cut. Markets are now sure that the Fed will lower rates by 25 basis points in September, and some traders even consider the possibility of a 50-point cut. While the "ultra-dovish" scenario is only priced at 12% now, it wasn't even considered before the August NFP data. Moreover, the market is almost sure that after an initial September cut, the Fed will further ease policy, lowering rates by a total of 50 or even 75 basis points.

In response to the growing "dovish" mood, the dollar came under considerable pressure, allowing buyers to push EUR/USD back into the 1.17 area.

However, this week's key releases may "come to the rescue" of the US dollar. If US inflation data once again beats expectations, the fundamental outlook for EUR/USD could change sharply. At minimum, the market will rule out the chance of a 50-point September cut and doubt that the Fed will ease policy aggressively. In other words, if inflation accelerates—especially above expectations—traders will revise long-term forecasts and the 25bp cut already priced in will lose impact. In this event, the dollar will attempt a comeback, including against the euro.

The first major release for EUR/USD will be on Wednesday, September 10, with the August Producer Price Index. Preliminary forecasts suggest the headline PPI will accelerate to 3.6% YoY (the highest since January 2025), after surging to 3.3% last month. Core PPI is also expected to rise to 3.8% after increasing to 3.7% in July.

On Thursday, September 11, the Consumer Price Index (CPI) will be released—the week's most important report. Most analysts predict headline CPI will accelerate to 2.9% (the highest since January), after two months at 2.7%. Core CPI (excluding food and energy) is expected to remain at 3.1%.

On Friday, September 12, attention will center on the University of Michigan's one-year inflation expectations. In June and July, this metric fell to 4.5% (it was 6.6% in May), but in August, it rebounded to 4.8%. If expectations rise further in September, this will reinforce the signals from CPI/PPI if those print at or above forecasts.

Also, on Friday, the University of Michigan Consumer Sentiment Index will be published. From January to April, this index fell steadily, reaching 52.2 in May; from June, it rebounded to a 5-month peak of 61.7 in July, but dropped to 58.2 in August. The forecast for September is another slight dip to 58.0—a sharper decline would add pressure on the dollar.

As we see, preliminary CPI/PPI forecasts support the greenback. If inflation measures meet or exceed forecasts (let alone surpass), dollar bulls will try to win back lost ground—even against the euro. However, one should not put too much faith in dollar appreciation. Inflation growth against the backdrop of a weakening labor market, falling ISM manufacturing, and tepid US GDP (import declines drove Q2's 3% growth) does not favor a stronger dollar—such a combination increases stagflation risks. How the Fed will react is a big question.

Conversely, if CPI/PPI slows unexpectedly, the market will remain confident that the Fed will cut rates by 50 (or possibly 75) basis points by year-end. Such ultra-dovish sentiment would support EUR/USD bulls.

Additional support for euro bulls may come from the ECB meeting on Thursday, September 11.

Most analysts expect the ECB to leave policy unchanged—this is the base and most anticipated scenario. The intrigue lies in future steps: Is the easing cycle done, or are more cuts in sight?

Recall that Eurozone headline CPI rose in August to 2.1% YoY (above the ECB's 2% target). Core CPI stayed at 2.3%. ECB board member Francois Villeroy de Galhau said inflation is "under control," and growth is as forecast. His colleague Isabel Schnabel, meanwhile, argued for holding a pause at upcoming meetings, citing Eurozone economic resilience but the risk of higher-than-expected inflation. She considers ECB policy already "moderately stimulative," and sees no need to cut rates further.

The ECB's September communication will likely sound "moderately hawkish."

In summary: Despite Friday's bullish impulse, EUR/USD remains in a broad 1.1580–1.1760 range it's traded in since late June. On the W1 chart, bulls and bears are still alternating initiative—but sellers have not broken below 1.1600, and buyers haven't conquered the 1.18 handle. Thus, it makes sense only to consider long positions if the pair consolidates above 1.1730 (the upper line of the daily Bollinger Bands). Short positions, in my view, is risky—even if US inflation accelerates. Given rising risks on both of the Fed's dual mandates, any CPI/PPI upside might turn out to be "bearish news" for the dollar—in every sense of the word.