EUR/USD senses barricades around 1.0800 amid caution in market mood

• EUR/USD has observed selling interest around 1.0800 as the risk-aversion theme is gaining traction.
• Fed Barkin is of the view that the inflation peak has been passed but halting policy tightening is not favorable.
• Investors' sentiment towards German prospects has uplifted as the risk of deeper recession has waived off

The EUR/USD pair has faced selling pressure while an attempt of a recovery above 1.0800 in the early Asian session.  The major currency pair is expected to deliver a downside move if it fails to sustain above the immediate support of 1.0780 as investors have underpinned the risk-aversion theme amid the result season in the United States.

An end to the four-day winning spell by S&P500 futures on Tuesday conveyed that risk-perceived assets need more strength to extend the rally. Optimism on an overall basis still persists as correction in the 500-stock basket was very limited, which could be considered as a healthy correction for now. Meanwhile, solid return on US Treasury bonds supported the US Dollar Index (DXY) from any downside. The 10-year US Treasury yields climbed above 3.54% ahead of United States Producer Price Index (PPI) data.

The street is expecting a decline in the annual headline and core PPI (Dec) to 6.8% and 5.9% respectively. This might support the Federal Reserve (Fed) to cool down the pace of policy tightening further.

Tom Barkin, the President, and CEO of the Fed Bank of Richmond cited that the economy has passed the peak of inflation but we are still far from the median Consumer Price Index (CPI). Therefore, backing off from interest rate hiking too soon is not favorable.

On the Eurozone front, the German ZEW Survey- Economic Sentiment was released at 16.9 vs. the expectation of -15.5 and the former release of -23.3. Investors' sentiment towards the economic prospects of Germany has been strengthened as the risk of deeper recession has been waived off.

Germany’s Economy Minister Robert Habeck, in an interview with WELT TV, said that “if there is a recession, it would possibly be only very short and not very deep.”

Moreover, European Central Bank (ECB) board member and Bank of Portugal Governor Mario Centeno said on Tuesday, “Fourth quarter growth in Europe will be most likely still positive.”