New data from Europe and the USA supported the euro

On Tuesday morning, September 3, the EUR/USD pair is trading in a narrow range of 1.1583-1.1600 dollars. The euro has risen slightly after two days of declines. The movement is taking place against the backdrop of several opposing factors: accelerating inflation in the eurozone, a weakening U.S. labor market, expectations regarding future decisions by the U.S. Federal Reserve, and a new round of military confrontation between the USA and Iran.

The latest Eurostat data proved to be an important signal for the European Central Bank. Inflation in the eurozone accelerated to 3.3% year-on-year in August, up from 2.9% in July. The main reason for the increase was higher energy prices amid the war and tensions around oil supplies.

However, core inflation, which excludes food and energy, fell from 2.5% to 2.4%. This somewhat reassures the ECB, as there is no strong spillover of the energy shock to other components of consumer prices.

Nevertheless, a rise in headline inflation above 3% strengthens expectations that the ECB may proceed with further monetary tightening. This factor could provide some support to the euro in the medium term.

U.S. statistics, on the contrary, look less clear-cut. According to the latest ADP report, the U.S. private sector created only 38,000 jobs in August, while analysts had expected growth of about 48,000. At the same time, the July figure after revision was 46,000. Especially notable was the decline in manufacturing employment — minus 17,000 jobs.

At the same time, the August ISM index for U.S. manufacturing fell to 54.6 points from 55.6 in July. Despite the decline, a reading above 50 indicates continued growth in business activity.

Now the market's main attention turns to the official U.S. employment report, due on Friday. Weak data could strengthen expectations of rate cuts or at least reduce the likelihood of a hawkish Fed policy. This would be a negative factor for the dollar and potentially support EUR/USD.