EUR/USD rebounds from a 10-month low around 1.0450, focus on US employment data

• EUR/USD snaps the recent losses due to the correction in the US Dollar.
• Greenback pulls back from the 11-month high marked on Tuesday.
• Better-than-expected Eurozone PMI could provide support in underpinning the Euro.

EUR/USD retraces the two-day losing streak, trading near a 10-month low marked on Tuesday. The spot price trades higher around 1.0480 during the early European trading hours on Wednesday.

The cautious sentiment due to the US Federal Reserve’s (Fed) interest rates trajectory is exerting pressure on the EUR/USD pair.

The US Dollar Index (DXY) retreats from the 11-month high marked on Tuesday. The spot price beats lower around 106.90 by the press time. However, the US Dollar (USD) strengthened on robust US employment data and higher US Treasury yields.

The 10-year US Bond yield reached its highest level since 2007, hitting 4.85% on Wednesday.

US JOLTS Job Openings exceeded expectations, contributing to an increase in US Treasury yields. The report revealed that job openings improved to 9.61 million in August from the previous reading of 8.92 million, surpassing market expectations.

Additionally, the hawkish tone surrounding the Fed to keep interest rates higher for a prolonged period is reinforcing positive sentiment for the Greenback.

Cleveland Federal Reserve President Loretta Mester indicated a likelihood of favoring an interest rate hike at the next meeting if the current economic conditions persist. On the other hand, Atlanta Fed President Raphael Bostic shared a patient perspective on the Fed's policy outlook, stating that there is no rush to raise or reduce rates.

Market participants are eagerly awaiting the US employment data, with the release of the ADP report on Wednesday and the Nonfarm Payrolls on Friday.

On the Euro side, the upbeat Eurozone’s HCOB Purchase Manufacturing Index (PMI) could provide minor support for the Euro. The report revealed that the Composite PMI for September improved to 47.2 from the previous 47.1, which was expected to remain consistent.

German Composite PMI showed a reading of 46.4, which was 46.2 prior. Services PMI improved to 50.3, exceeding the market consensus of 49.8.

Eurozone appears to be adopting a wait-and-see approach regarding interest rate hikes from the European Central Bank (ECB). Recent statements from ECB officials showed a complex situation with a primary decision to handle inflation.

ECB Governing Council member Tuomas Välimäki holds an optimistic view, stating no stagflation prospect in the euro area. On the contrary, ECB Chief Economist Philip Lane acknowledges more work is needed to reach the inflation target, reflecting a more cautious stance.

These divergent perspectives highlight the complexities and uncertainties in the Eurozone's economic overview, potentially acting as a headwind for the Euro.

The upcoming economic indicators, such as the Producer Price Index (PPI) and Retail Sales, will likely offer additional insights into the Eurozone's economic outlook. A slew of speeches from the ECB officials is scheduled later in the day, with a primary focus on ECB's President Lagarde speech.