EUR/USD extends recovery to near 1.0350 as risk-off mood wanes, Eurozone Inflation eyed

• EUR/USD has picked demand near 1.0320 as the risk aversion theme is losing its steam.
• An expansion in US GDP could create more troubles for the Fed.
• The headline Eurozone inflation is expected to decline to 10.4%.

The EUR/USD pair has witnessed recovery after dropping to near 1.0320 in the Asian session. The major currency pair has managed to safeguard the round-level cushion of 1.0300 for now and is expected to remain sideways ahead of the Eurozone Harmonized Index of Consumer Prices (HICP) figures.

The risk aversion theme has lost its grip and the US Dollar Index (DXY) has turned volatile. The upside in the USD Index seems capped as the Federal Reserve (Fed) chair Jerome Powell, in his speech on Wednesday, is expected to sound ‘less-hawkish’ on interest rate guidance. S&P500 futures are displaying a lackluster performance as investors are expected to decide on pouring funds back into equities post-Fed Powell’s speech.

Meanwhile, 10-year US Treasury yields have witnessed mild selling pressure after hitting a high of 3.75%.

In addition to the Fed chair’s speech, investors will also focus on US Gross Domestic Product (GDP) data. As per the projections, the United States economy has grown at a rate of 2.6%, similar to its prior release. Expansion or stability in the GDP rates could accelerate troubles for the Fed. The US central bank has worked on slowing down the inflation rate in the entire year. Stable GDP rates express that retail demand is solid and inflation is not expected to decline.

On the Eurozone front, investors are focusing on the release of the inflation figures. As per the consensus, the headline HICP will decline to 10.4% vs. the prior release of 10.6%. While the core HICP data that excludes oil and food prices is seen unchanged at 5%.