EUR/USD pares weekly loss above 1.0950 with eyes on US inflation, debt-ceiling drama

• EUR/USD seesaws around intraday high during the first positive day in three.
• Cautious optimism, comparatively more hawkish ECB talks than Fed underpin Euro pair’s recovery.
• Failure of US debt-ceiling talks, banking sector woes also weigh US Dollar.
• Final prints of Germany’s HICP, US CPI for April will be crucial for intraday directions.

EUR/USD clings to mild gains around 1.0970 as it prints the first daily upside in three amid early Wednesday morning in Europe.

That said, the Euro pair’s latest rebound could be linked to the broad US Dollar pullback ahead of the key US inflation data for April, as well as cautious optimism in the market despite mixed feelings about the US default fears and banking woes. Also keeping the quote on the bull’s radar could be comparatively more hawkish comments from the European Central Bank (ECB) Officials than those from the Federal Reserve (Fed) members.

On Tuesday, ECB’s Peter Kazimir said, “Based on current data, the ECB will have to keep raising interest rates for longer than anticipated.” On the same line was ECB policymaker Martins Kazaks who warned that the rate-hiking may not be finished in July.

Meanwhile, New York Fed President John Williams said, per Reuters, "Fed has not said it's done raising rates."

Elsewhere, US Senate Majority Leader Chuck Schumer conveyed the absence of progress in the key debt-ceiling negotiations during the first round of talks in the White House. Even so, US President Joe Biden called the meeting “productive” and reported that House Speaker Kevin McCarthy said during the meeting that the US would not default on its debt, per Reuters. The news also quotes US House Speaker McCarthy saying that the two sides agreed for their staff to get together this week, and for the principals to meet again on Friday to continue talking. With this, traders remain hopeful of avoiding the US default. Even so, the global rating giant Moody’s recently said, “What once seemed unimaginable now seems a real threat.”

On the other hand, International Monetary Fund’s (IMF) Chief Economist Pierre-Olivier Gourinchas cited banking fears on Tuesday. The same follows the Fed's quarterly survey of bank loan officers, released on Monday, which highlights the negative impact of higher rates on credit conditions.

It’s worth noting that the recently downbeat US NFIB Small Business Optimism index and Germany Industrial Production numbers fail to inspire EUR/USD traders amid mixed sentiment.

Amid these plays, the S&P 500 Futures print mild gains while licking the previous day’s losses whereas the US 10-year and two-year Treasury bond yields print the first daily loss in five around 3.50% and 4.02% at the latest. On the other hand, the US Dollar Index (DXY) also retreats to 101.50 after rising in the last two consecutive days.

Looking forward, the final readings of Germany’s inflation gauge, per the
Harmonized Index of Consumer Prices (HICP) for April, expected to confirm 7.6% YoY forecasts, may entertain EUR/USD pair traders ahead of the all-important US CPI for the said month.

If the scheduled US CPI numbers confirm escalating inflation pressure in the world’s biggest economy, the recently hawkish Fed bets may gain momentum and can allow the US Dollar to pare intraday losses, which in turn can recall the EUR/USD bears.

Technical analysis

EUR/USD remains sidelined between triple tops around 1.0940 and the 21-DMA of near 1.1000. Even so, the buyers appear to have run out of steam of late.