Impact of diverging global CPIs on FX pairs

I'm trying to get a better handle on how to factor in CPI differentials when trading FX, especially with the current landscape where we're seeing some economies, like the US, showing signs of cooling inflation while others, say parts of Europe, are still grappling with persistent high numbers. My understanding is that higher relative CPI could lead to a stronger currency due to anticipated rate hikes, but then there's also the demand destruction aspect if inflation gets too high. How do seasoned traders weigh these conflicting forces when looking at pairs like $EURUSD, especially when the narratives around their respective central bank responses seem to shift so quickly?