EUR/USD finds respite as US yields dip as traders eye US and German inflation data

• EUR/USD rebounds from daily lows, capitalizing on a 17 bps plunge in US 10-year Treasury yields.
• Dovish remarks from Fed officials, hinting at a pause in rate hikes, further dampened USD’s appeal.
• Anticipation builds for forthcoming US and German inflation data, potentially swaying ECB and Fed stances.

The Euro (EUR) recovered ground against the US Dollar (USD) amidst dovish comments from Federal Reserve (Fed) officials, which spurred a drop In US Treasury yields a headwind for the Greenback (USD). The EUR/USD is trading at 1.0616 after bouncing from a daily low of 1.0554.

Euro bounces back against faltering US Dollar amidst dovish Fed tilt

A light economic calendar on both sides of the Atlantic keeps the EUR/USD entertained on US Dollar dynamics and market mood. The US 10-year Treasury bond yield has plunged 17 bps to 4.632% since Monday, undermining the Greenback as shown by the US Dollar Index (DXY). The DXY, which measures the US Dollar performance vs. a basket of six currencies, is diving for the fifth consecutive day, down 1.62%, after hitting a yearly high of 107.34. At the time of writing, it hovers around 105.67, losses 0.36% daily.

A slew of Fed policymakers struck the markets with dovish-tilted remarks, saying that higher long-term US bond yields might prevent them from increasing rates at the upcoming meetings. Today, Atlanta’s Fed President Raphael Bostic stated that monetary policy is already restrictive and that further increases are unnecessary.

Data-wise, the IS small business sentiment moderately decelerated due to inflation and labor shortages. A poll from the New York Fed showed that consumers are expecting inflation a year from not to hit 3.7%, above August’s 3.6%, while for a three-year, they see prices at 3%, from August’s 2.8%.

The drop in German bond yields is capping the EUR/USD advance on the Eurozone front, while the European Central Bank (ECB) is expected to halt its tightening cycle, according to market participants.

Ahead of the week, the US economic docket would feature inflation data on the producer and consumer side. Across the pond, Germany’s inflation is expected to slow down, which could reinforce the thesis that the ECB might keep rates unchanged.

EUR/USD Technical Levels