Near 1.0610, EUR/USD continues To Advance On The Back Of German And US Data

During the early Asian session on Wednesday, the EUR/USD was trading in the positive zone near 1.0610 as it attempted to extend its gains from the previous day. The pair is encountering upward support as a result of the ongoing decline in the US Dollar (USD) following Federal Reserve (Fed) officials' dovish remarks.

The markets have been influenced by a surge of dovish-leaning remarks made by policymakers of the Federal Reserve. Several of these policymakers have expressed apprehension that the increased yields on long-term US bonds may hinder their willingness to raise rates at upcoming meetings.

Following the dovish trajectory established by two fellow Fed colleagues on Monday, Atlanta Fed President Raphael Bostic stated unequivocally that the current monetary policy is already restrictive, rendering additional rate hikes unnecessary. Neel Kashkari, president of the Fed in Minneapolis, echoed this sentiment on Tuesday.

As of press time, the US Dollar Index (DXY) is trading at a level near 105.70, extending losses that commenced the week prior. On Tuesday, the US Dollar (USD) encountered difficulties notwithstanding a marginal resurgence in US Treasury yields. At the moment, the yield on 10-year US Treasury bonds is 4.64 percent, which is a decrease from the previous value.

Economic data will be diligently monitored by investors, with a specific emphasis on inflation figures. Wednesday marks the release of the Producer Price Index (PPI), while Thursday sees the disclosure of the FOMC meeting minutes and the Consumer Price Index (CPI).

However, the EUR/USD pair's progress may be impeded by the increase in German bond yields, as market participants expect the European Central Bank (ECB) to cease its tightening policy.

President of the Bank of France and a member of the Governing Council of the European Central Bank (ECB), Francois Villeroy de Galhau, stated on Tuesday that "at this time, additional rate hikes are not the best course of action."

ECB President Christine Lagarde stated in an interview with the French newspaper La Tribune Dimanche, "The key ECB interest rates have reached levels that, if sustained for an adequate period of time, will significantly contribute to the prompt restoration of inflation to the target level."

President Lagarde maintains a positive outlook regarding the achievement of the objective to reduce inflation to 2%. Furthermore, she conveyed assurance regarding the state of gas reserves in Europe.

Predictions indicate that inflation in Germany may decelerate, which could lend credence to the idea that the ECB will maintain current interest rates.