EUR/USD Reaches a Two-Month High Around 1.1030 As USD Selling Persists

The EUR/USD pair trades with a bullish bias for the fifth consecutive day on Wednesday and advances to 1.1030, its highest level since May 8 during the Asian session.

The momentum is fueled by the prevalent selling sentiment surrounding the US Dollar (USD), which is anticipated to extend its recent downtrend observed over the prior week or so and drop to a new two-month low. Several Federal Reserve (Fed) officials stated on Monday that the US central bank will likely need to increase interest rates further to curb inflation, but that the current monetary policy tightening cycle is nearing its conclusion. This causes yields on US Treasury bonds to fall further and continues to drag on the dollar. Aside from this, a generally optimistic risk sentiment further undermines the safe-haven dollar and supports the EUR/USD pair.

In the meantime, bullish traders appear unaffected by Tuesday's disappointing publication of the German ZEW Economic Sentiment Index, which fell to -14.7 in July from -8.7 in June and missed expectations. German consumer inflation figures, which confirmed the rebound in June after three months of moderation, essentially offset this. In actuality, the German CPI was finalised to show a monthly increase of 0.3% and an annual increase of 6.4%, up from the preceding month's readings of 0.1% and 5.4%, respectively.

The data strengthens the likelihood of further interest rate increases by the European Central Bank (ECB), which is viewed as an additional factor supporting the shared currency. It will be interesting to see if the EUR/USD pair can capitalise on its recent rally from the vicinity of the 100-day Simple Moving Average (SMA) support or if bulls elect to reduce their exposure prior to the US consumer inflation data. The key US CPI report is expected to be released later during the early North American session and will influence USD price dynamics in the immediate future.