• EUR/USD recovers initial losses on Wednesday in the Asian session.
• The US Dollar Index backtracks from yearly highs despite a rebound in US T-bond yields.
• Divergent monetary policy outlooks between the ECB and Fed weighs on the euro, US inflation eyed.

The EUR/USD holds gains in the  Asian session on Wednesday. After testing the fresh 2021 lows around 1.1520 in the overnight session, the pair rebounded and bounced back above 1.1550. At the time of writing,  EUR/USD is trading at 1.1552, up 0.22% for the day.

A combination of factors sponsored the movement in the pair. The pullback in the greenback from a one-year high of around 94.50 remains the major catalyst to push EUR/USD on the higher side.

Investors remain cautious ahead of the US Core Inflation Index (CPI) data, as a higher reading could propel the Fed’s to start tapering as early as November. In addition to that, the minutes of the Fed’s latest policy meet will also shed light on the timeline of the Fed’s action. 

The Consumer Inflation consensus pointed to a 5.3% rise in the CPI for September on yearly basis, confirming the supply-demand imbalances in the economy. The number of US job openings fell 10.439 million in August, below the market expectations of 10.925 million. Meantime, the US House of Representatives approved the government’s borrowing limit to $28.9 trillion, pushing off the deadline for debt default only until December.

On the other hand, the shared currency holds ground despite the European Central Bank’s (ECB) dovish outlook. ECB Governing Council member Francois Villeroy de Galhau showed his concern over the failure of meeting the 2023 inflation target then exceed it. His comments seem to support the existing accommodative monetary policy. The eurozone investor morale declined to 21.0 in October, well short of the market expectations of 37.0.

As for now, traders are waiting for the German Harmonized Index of Consumer Prices, Eurozone Industrial Production, US CPI data, and the FOMC minutes to gain fresh trading impetus.

EUR/USD additional levels