EUR/USD is trading near 1.0500, trying a sluggish rebound from an eight-month low of 1.0488 in European trading on Thursday. The pair is under pressure ahead of German inflation data due to broad US Dollar upside consolidation and Eurozone economic worries.

In Germany, inflation, as measured by the change in the Consumer Price Index (CPI), is expected to fall to 4.6% year on year in September from 6.1% in August. Earlier in the day, German regional data indicated easing price pressures. Annual CPI inflation in Brandenburg fell to 5.6% from 7.1%, while in Hesse it fell to 4.7% from 6%.

A weaker-than-expected CPI figure in Germany could make it difficult for the Euro to maintain its competitiveness. A stronger-than-expected figure, on the other hand, which is unlikely, might help EUR/USD inch higher.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

The US economic calendar will include the final revision of second-quarter GDP growth and weekly Initial Jobless Claims data. Market participants, on the other hand, may choose to ignore these data and focus on political developments. If Republicans and Democrats reach an agreement to avoid a government shutdown before the October 1 deadline, risk flows could dominate financial markets, causing the USD to fall substantially.

On Wednesday, the EUR/USD fell below 1.0500 and moved dangerously close to the 2023 low of 1.0483. The pair appears to have stabilized above 1.0500 early Thursday, as investors prepare for crucial macroeconomic data releases.

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The sell-off in US Treasury bonds resumed in the middle of the week, as investors braced themselves for the potential negative impact of a government shutdown on the US credit rating. “I don’t see support in the House” for the Senate’s financing package, Republican House Speaker Kevin McCarthy said Wednesday. The next procedural vote on the bill is scheduled for Thursday.

As a result, US T-bond rates continued to rise, and the US Dollar emerged as the go-to safe-haven asset, leading EUR/USD to remain under pressure.


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