• EUR/USD remains below 1.1050 as investors turn cautious ahead of the US inflation for August and the ECB policy announcement.
• The ECB is expected to cut its key borrowing rates by 25 basis points (bps).
• US inflation data will influence market speculation for the Fed’s potential interest rate cut size.

EUR/USD struggles to gain ground near its weekly low of 1.1030 in Tuesday’s European session. The major currency pair remains under pressure as investors turn cautious ahead of the United States (US) Consumer Price Index (CPI) data for August and the European Central Bank’s interest rate policy, which will be published on Wednesday and announced on Thursday, respectively.

Investors will keenly focus on the US consumer inflation data as it is just a week before the Federal Reserve’s (Fed) monetary policy meeting. The inflation data will provide fresh cues about whether the Fed will start its policy-easing process gradually or aggressively. The importance of the inflation data in getting more insights about the magnitude of the Fed interest rate cut has increased significantly as the US Nonfarm Payrolls (NFP) data for August failed to make a clear case for the Fed’s likely interest rate cut size.

Earlier, market participants remained worried that the Fed could opt for a large interest rate cut in September due to a sharp slowdown in the US job growth, indicated by the US NFP report for July, which prompted fears for the economy entering a recession. However, Friday’s NFP report showed that the labor market health is not as bad as it appeared last month.