Ella 
In early Asian trading on Tuesday, the EUR/USD pair weakened for the fourth consecutive day. Amid heightened tensions in the Red Sea, the market maintained risk aversion, pushing risk assets such as the euro (EUR) lower. EUR/USD is currently trading around 1.0938, down 0.12% on the day. Later on Tuesday, German inflation data and the ZEW survey will be released.
Eurostat revealed on Monday that industrial production remained weak across the euro zone. The monthly rate of this indicator rose to -0.3% in November from -0.7% in the previous month. Industrial production fell at an annual rate of 6.8% in November, compared with a 6.6% decline in the previous month. Production figures from both Germany and Italy were down, which put some selling pressure on the euro and acted as a headwind for EUR/USD.
Separately, European Central Bank (ECB) policymaker Joachim Nagel said on Monday that it would be premature for the central bank to discuss interest rate cuts as inflation remains high. Nagel added that they may need to wait for new data and that interest rate decisions will be taken gradually at the ECB meeting.
In the United States, the dovish bias of the Federal Reserve’s stance may limit the upside of the US dollar (USD). After raising interest rates by 525 basis points (bps) since March 2022, the Federal Reserve policy rate is currently in a range of 5.25%-5.50%. Investors expect the Federal Reserve to cut interest rates as early as March 2024.
