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The EUR/USD maintains Wednesday's recovery from the lowest levels in three weeks while gaining offers to 1.0985 in Asia on Thursday morning. In doing so, the Euro/Dollar pair is buoyed by a generally weaker US Dollar in the wake of tepid US inflation data and hawkish comments from European Central Bank (ECB) officials. Nonetheless, looming fears of a US default and apprehension ahead of a few more indications of US inflation, as well as banking troubles, challenge pair buyers during generally inactive trading hours.

Inflation in the United States, as measured by the Consumer Price Index (CPI), decreased to 4.9% year-over-year in April, below market expectations of a 5.0% reading. In contrast to the prior measurements of 0.1%, the MoM figures matched the optimistic 0.4% forecasts. In addition, the CPI excluding food and energy, also known as the core CPI, matched the market consensus of 5.5% and 0.4% on an annual and monthly basis, respectively, compared to 5.6% and 0.4% previously.

ANZ Analysts favored a recent reduction in hawkish Fed wagers and stated, "We believe the combination of the April CPI and labor market report strongly argues against an early Fed pivot." The core monthly CPI has been stagnant at 0.4% m/m or slightly higher for the past five months, and the 3-month annualized rate has surpassed 5.0%. Strong job growth contrasts with the necessary deceleration required for the unemployment rate to begin moving toward the FOMC's end-of-year forecast of 4.5 percent.

Christine Lagarde, president of the European Central Bank (ECB), stated on Wednesday, "We still have more ground to cover in the fight against inflation." Nonetheless, ECB Governing Council member Yannis Stournaras told a Greek newspaper, "As things stand right now, we can say that interest rate hikes will end in 2023." In the same vein, ECB policymaker and Bundesbank head Joachim Nagel stated, "We may be nearing the end of the rate hike cycle." In addition, ECB policymaker Mario Centeno was among the first to discuss rate reductions "at some point in 2024."

Aside from this, US policymakers were unable to reach an agreement on the debt ceiling during their first attempt, but they set the ball in motion by allowing office members to debate the details and try again on Friday, which boosted market sentiment. "Detailed talks on raising the United States government's $31.4 trillion debt ceiling began on Wednesday, with Republicans continuing to insist on spending cuts," reported Reuters, a day after the first meeting between Democratic President Joe Biden and top congressional Republican Kevin McCarthy in three months.

Wall Street benchmarks closed with varied results, while US Treasury bond yields reversed a four-day uptrend. In addition, the US Dollar Index (DXY) posted its first daily decline in three days due to recent pressures.

The monthly Producer Price Index (PPI) for April, which is anticipated to decline to 2.4% YoY but improve to 0.2% MoM for the Core PPI, will be crucial for intraday direction because EUR / USD traders may be looking for more information about US inflation. In addition, ECB discussions and risk catalysts such as US default concerns and banking repercussions fears can influence the pair's movements.

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