Ella 
Entering Thursday’s European session, EUR/USD gained momentum and held above 1.0980. The pair rose for the second day in a row and is now trading around 1.0986, up 0.12% on the day.
In the euro zone, Italy’s surprise tax on bank windfall profits and a potential recession in Germany weighed on the single currency against rivals. Additionally, the possibility of the ECB taking a pause in rate hikes at its September meeting amid easing inflationary pressures and recession fears could limit the upside for the euro and act as a headwind for EUR/USD.
Earlier this week, Germany’s reconciled inflation rate came in at 6.5% in July, in line with market consensus. The Sentix Investor Confidence Index for the Eurozone improved from -22.5 to -18.9 in July, compared with the market consensus of -23.4. Later in the day, the ECB will publish its Economic Bulletin. The report could provide clues about the ECB’s monetary policy throughout the year.
On the dollar front, recent speeches by Fed policymakers indicated that the Fed’s stance has shifted from further rate hikes to holding rates steady. Philadelphia Fed President Patrick Harker said the central bank could keep rates on hold. Meanwhile, Atlanta Fed President Raphael Bostic said there was no need for further rate hikes. However, investors will take more cues from U.S. inflation data. Weaker U.S. inflation data could cap the dollar’s moves and boost EUR/USD.
The U.S. CPI report for July will be released on Thursday. The data will have a huge impact on the Fed’s future rate hike path and help investors determine the direction of EUR/USD. The annual rate of US CPI is expected to rise from 3% to 3.3%. The core CPI is expected to remain unchanged at 4.8%. In addition, the U.S. July PPI will be released on Friday.
