EUR/USD recovers to 1.0760 amid USD weakness, German Industrial Production data looms

• EUR/USD posts modest gains around 1.0760 on the weaker USD. 
• Eurozone Retail Sales were down 1.1% MoM in December, its sharpest fall in a year.
• Fed’s Harker said a soft landing for the US economy is in sight, citing declining inflation and a still-strong labor market.
• Investors will focus on German Industrial Production on Wednesday. 

The EUR/USD pair bounces off the 2024 lows of 1.0720 and rebounds to 1.0760 on the renewed selling bias in the US Dollar (USD) during the early Asian session on Wednesday. Investors await German Industrial Production on Wednesday, which is estimated to drop 0.4% MoM in December. 

On Tuesday, the Federal Reserve Bank of Philadelphia President, Patrick Harker said that the Fed made the right choice last week to leave interest rates unchanged amid an outlook that likely heralds more inflation declines.

Meanwhile, Fed Bank of Cleveland President Loretta Mester said that she might open the door to lower interest rates later this year if the economy evolves as expected. Finally, Fed Chair Jerome Powell said on Sunday night that the central bank remains on track to cut interest rates three times this year, expected to begin as early as May. The delay of monetary policy easing from the Fed could provide some support to the Greenback in the near term. Traders have now priced in 15% odds of rate cuts in the March meeting, according to the CME's FedWatch Tool. 

Data released from Eurostat showed on Tuesday that Eurozone Retail Sales fell 1.1% MoM in December from a 0.3% rise in the previous reading, worse than the market expectation of 1.0%. On an annual basis, Eurozone Retail Sales dropped 0.8% YoY in December from a 0.4% decline in November, above the consensus of 0.9% fall. 

The European Central Bank (ECB) policymaker Pablo Hernandez de Cos said on Tuesday that he is confident that inflation is coming back to its 2% target and that its next move will be cutting interest rates. However, ECB Governing Council member Boris Vujcic stated that the central bank needs to have patience at the moment before cutting interest rates to make sure that wage costs aren’t translating into sustained wage pressure. 

Market players will watch Industrial Production, due later on Wednesday. Later this week, the Economic Bulletin will be released on Thursday, and German Consumer Price Index (CPI) inflation data will be published on Friday.