Ella 
EUR/USD regained some ground near 1.0725 after bouncing off the 1.0697 lows. The rebound in major currency pairs was supported by downward pressure on the US dollar. Meanwhile, the U.S. dollar index (DXY) is trading lower at 104.70.
U.S. Treasury Secretary Janet Yellen said on Sunday she was increasingly confident the United States could curb inflation without a major impact on the labor market. She added that every indicator of inflation was receding and there was no massive wave of layoffs.
Last week’s upbeat U.S. economic data provided support for the theory of long-term high interest rates in the United States. Markets have priced in a 93% chance of no change at the September meeting and a 43.5% chance of a rate hike at the November meeting, according to CME FedWatch Tool. This, in turn, could boost the US dollar (USD) and limit the upside for EUR/USD.
Federal Reserve Governor Christopher Waller said the Fed has additional room to raise interest rates, but data will determine that. Boston Fed President Susan Collins pointed to the risks of an inappropriately constrained monetary policy stance and called for patient, cautious but thoughtful policy. Chicago Fed President Austan Goolsbee outlined the central bank’s goal of guiding the economy into a “golden channel.” This path represents a scenario in which inflation falls but does not lead to a recession.
In the euro, analysts believe the European Central Bank (ECB) will keep interest rates unchanged at its next policy meeting on Thursday. Destatis data released on Friday showed that Germany’s Harmonized Consumer Price Index (HICP) came in at 6.4% year-on-year in August, in line with market expectations, while the core consumer price index remained stable at 6.1%. Additionally, Eurozone gross domestic product (GDP) grew 0.1% quarter-on-quarter in the second quarter, compared with 0.3% in the previous quarter and is expected to be 0.3%.
On Wednesday, investors will pay close attention to the release of the U.S. Consumer Price Index (CPI) for August. The monthly figure is expected to rise 0.5%, while the monthly core figure is expected to remain unchanged at 0.2%. On Thursday, the focus will turn to the European Central Bank’s monetary policy. This event will provide clear direction for EUR/USD.
