Anna 
In Wednesday’s European session, the EUR/USD pair fell to 1.0830 after failing to reclaim a two-month high near 1.0900 reached on Tuesday. The retracement comes as market sentiment turns cautious ahead of key economic data releases, including the Eurozone preliminary Consumer Price Index (CPI) data for May and the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for April, scheduled for publication on Friday.
Investors are closely watching these inflation indicators as they will significantly influence speculation regarding potential interest rate cuts by both the European Central Bank (ECB) and the US Federal Reserve (Fed).
The US core PCE inflation data, which is the Fed’s preferred inflation measure, is expected to show steady growth on a monthly and annual basis, with estimates of 0.3% and 2.8%, respectively.
Meanwhile, the US Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, has extended its recovery to 104.80. The sharp rebound in the US Dollar is driven by a cautious market sentiment, with investors becoming risk-averse. This shift in sentiment follows a reduction in expectations for Fed rate cuts at the September meeting, as Fed officials have indicated a preference for keeping interest rates unchanged until significant progress is made in addressing disinflation. Currently, investors anticipate the Fed to commence interest rate reductions from the last quarter of the year.
