EUR/USD rebounds towards the 1.0980 mark, upside seems limited

• EUR/USD recovers its recent losses and edges higher to 1.0975 in the early European session.
• The announcement of Italy's bank tax exerts pressure on the Euro.
• Moody's downgraded the credit ratings of several small to mid-sized US banks.
• Market players will keep an eye on the US Consumer Price Index (CPI), the Producer Price Index (PPI).

The EUR/USD pair recovers some lost ground just below the 1.1000 area on Wednesday after retreating to 1.0927 on the announcement of surprising Italy's bank tax. The major currently trades at 1.0977, gaining 0.19% for the day.

About the data, the German Harmonized Index of Consumer Price (HICP) came in at 6.5%, matching the market consensus. Earlier this week, the Eurozone Sentix Investor Confidence improved from -22.5 in July to -18.9 in August, versus the market consensus of -23.4.

The Euro continues under pressure as the European Central Bank's (ECB) peak rate speculation continues, with the possibility of September's meeting at 35% and October's meeting at 55%.

On the US Dollar docket, Moody's downgraded the credit ratings of several small to mid-sized US banks and issued a warning about possible cuts to the ratings of larger institutions. The giant credit rating company stated that higher interest rates have increased the likelihood of a recession, placing pressure on the finance and real estate industries to adjust to the post-pandemic environment.

Furthermore, the US trade data show a sluggish economic rebound and subdued global demand in the country. The US trade deficit narrowed sharply in June, with the figure coming in at $65.5 billion, higher than expectations of $65 billion and below the $68.3 billion prior. Imports fell 1.0% to $313 billion from $316.1 billion the previous month, the lowest level since November 2021. While Exports dropped 0.1% to $247.5 billion, a 15-month low.

Investors will take more cues from the US inflation figures. The weaker than expected data could cap the upside of the Greenback and acts as a tailwind for EUR/USD.

In the absence of top-tier economic data releases from the Eurozone, the USD price dynamic will be the main driver for the EUR/USD pair. Market players will closely watch the US Consumer Price Index (CPI) and the Producer Price Index (PPI) for July, due on Thursday and Friday, respectively.