Dollar and Euro Steady as Markets Await US CPI, Hormuz Risks Support Oil

The US Dollar and Euro are trading in narrow ranges on Tuesday as forex traders avoid taking large positions ahead of a key US inflation report. Currency markets are balancing weaker US labour data against renewed energy-price risks and uncertainty surrounding the Federal Reserve’s next policy move. The Dollar remains relatively stable while EUR/USD is holding close to recent levels.

The main event for global forex markets is now the July US Consumer Price Index, scheduled for release on Wednesday, August 12 at 8:30 a.m. Eastern Time. The report could significantly influence expectations for the Federal Reserve’s September meeting and determine the next directional move in the US Dollar.

Expectations for further Federal Reserve tightening have already softened following weak US employment data. The Fed kept its target interest-rate range unchanged at 3.50% to 3.75% at its July 29 meeting, although inflation remains above the central bank’s 2% objective.

A softer-than-expected CPI reading could strengthen expectations that the Fed will remain on hold, potentially putting additional pressure on the Dollar. A stronger inflation print could have the opposite effect by pushing Treasury yields higher and reviving expectations for tighter monetary policy. This makes Wednesday’s inflation release particularly important for EUR/USD, GBP/USD, USD/JPY and other major currency pairs.

RBA Holds Cash Rate at 4.35%

The Australian Dollar is also in focus after the Reserve Bank of Australia left its cash rate target unchanged at 4.35% on Tuesday. The decision was unanimous, according to the central bank.

The RBA had raised the cash rate to 4.35% in May and maintained that level in June before extending the pause at its August meeting. Recent inflation developments and global uncertainty continue to keep the Australian central bank cautious about the future direction of monetary policy.

For AUD/USD, the rate hold itself was widely anticipated, meaning traders are likely to focus more heavily on the RBA’s assessment of inflation and any indications about whether additional tightening remains possible.

Hormuz Tensions Keep Inflation Risks Alive

Geopolitical developments around the Strait of Hormuz remain another important market driver. Oil prices have risen as uncertainty over negotiations involving the United States and Iran raises doubts about a rapid normalization of shipping through the key energy route.

Higher crude prices complicate the global inflation outlook because sustained increases in energy costs can feed into transportation, manufacturing and consumer prices. That means oil-market developments could influence not only commodity-linked currencies but also expectations for the Fed, ECB and other major central banks.

Euro Traders Watch European Growth

The Euro is also receiving some support from relatively resilient regional economic data. Eurostat’s preliminary estimate showed that Eurozone GDP grew 0.4% quarter over quarter in Q2 2026, while the broader European Union expanded by 0.5%.

However, the single currency remains sensitive to energy-price developments because higher oil and gas costs can create both inflationary pressure and downside risks for European economic growth.

For now, EUR/USD remains caught between softer expectations for US monetary tightening and renewed concerns about global energy inflation. This combination is keeping the pair in a relatively tight range ahead of the US CPI release.

Forex Outlook

Wednesday’s inflation report could break the current period of consolidation across major currency pairs.

A weaker CPI reading would likely reinforce the view that the Fed can remain patient, potentially creating downside pressure on the Dollar and supporting currencies such as the Euro, Pound and Australian Dollar.

A stronger inflation surprise could revive expectations for additional Federal Reserve tightening, supporting US yields and the Dollar while putting pressure on risk-sensitive currencies.

Until the CPI numbers arrive, forex markets are likely to remain highly sensitive to energy prices, Treasury yields and new geopolitical headlines.