EUR/USD holds below 1.1000 ahead of Eurozone GDP, US CPI data

• EUR/USD trades flat near 1.0990 in Wednesday’s early European session. 
• The US PPI rose 2.2% year-on-year in July, softer than expected. 
• ECB is likely to deliver two more 25 basis point rate cuts this year, according to Reuters surveys. 

The EUR/USD pair trades on a flat note near 1.0990 during the early European session on Wednesday. Traders prefer to wait on the sidelines ahead of the release of top-tier economic data from the Eurozone and the US. The Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) and the US Consumer Price Index (CPI) for July will be closely watched. 

Data released by the Bureau of Labor Statistics on Tuesday showed that the Producer Price Index (PPI) for final demand in the US rose 2.2% YoY in July from 2.7% in the previous month, below the 2.3% expected. The monthly PPI increased by 0.1% MoM in the same period after rising by 0.2% in June. The Core PPI, which excludes volatile food and energy prices, rose 2.4% YoY in July, compared to 3.0% in June, lower than the market consensus of 2.7%.

The markets expect a 25 basis point (bps) rate cut by the Federal Reserve (Fed) in September, while a 50 bps cut in September cannot be ruled out, but it will depend entirely on the data. Atlanta Fed President Raphael Bostic emphasized on Tuesday that recent economic data made him "more confident" that the Fed can get inflation back to its 2% target. Still, more evidence is needed before he's ready to support lowering interest rates. 

Across the pond, the Eurozone economy is estimated to grow 0.3% QoQ and 0.6% YoY in Q2. The weaker-than-expected GDP growth numbers could weigh on the Euro (EUR) against the US dollar (USD).

According to Reuters, the majority of economists polled see the European Central Bank (ECB) cutting its deposit rate twice more this year, in September and December. The anticipation that the ECB will cut rates fewer than markets previously expected is likely to cap the downside for the Euro for the time being. ING chief Eurozone economist, Carsten Brzeski, noted, "I expect the ECB to slightly revise upward its inflation projections, and it's strange then to continue cutting rates.”