Ella 
EUR/USD recovers recent losses and edged up to 1.0975 in early European session
EUR/USD pared some of its losses on Wednesday, just below the 1.1000 area, after retreating to 1.0927 following Italy’s surprise announcement of a bank tax. The pair is currently trading at 1.0977, up 0.19%.
Relevant data, Germany’s harmonized inflation rate recorded 6.5% in July, in line with market consensus. Earlier this week, the Eurozone Sentix Investor Confidence Index improved to -18.9 from -22.5 in July in July, compared with the market consensus of -23.4.
The euro continued to come under pressure as the European Central Bank’s interest rate peak expectations continued, with a 35% chance of a rate hike in September and a 55% chance of a rate hike in October.
In the dollar, Moody’s downgraded the credit ratings of several small and mid-sized US banks and warned of possible downgrades of large institutions. The giant credit rating firm said rising interest rates increased the likelihood of a recession, putting pressure on the financial and real estate sectors to adapt to the post-pandemic environment.
In addition, U.S. trade data showed a lackluster economic rebound in the country and subdued global demand. The U.S. trade deficit narrowed sharply in June to $65.5 billion, higher than expectations for $65 billion and lower than the previous reading of $68.3 billion. Imports fell to $313.0 billion, or 1.0%, from $316.1 billion in the previous month, the lowest level since November 2021. Exports fell 0.1% to $247.5 billion, a 15-month low.
Investors will take further cues from U.S. inflation data. Weaker-than-expected data could limit dollar gains and benefit EUR/USD.
With no major economic data releases from the euro zone, the dollar will be the main driver of EUR/USD. Market participants will be keeping a close eye on U.S. CPI and PPI data for July, which are due to be released on Thursday and Friday, respectively.
