EUR/USD attracts some sellers below the mid-1.0900s, German CPI data, ZEW Survey eyed

• EUR/USD loses traction below the mid-1.0900s amid the geopolitical tension in the Red Sea.
• Eurozone Industrial Production dropped 0.3% MoM in November from a 0.7% fall in October.
• A dovish remarks from the Federal Reserve (Fed) might cap the USD’s upside.
• Investors will closely watch the Eurozone Consumer Price Index (CPI) report, due on Tuesday.

The EUR/USD pair trades weaker for the fourth consecutive day during the early Asian session on Tuesday. The risk-off mood in the market drags risky assets like the Euro (EUR) lower amid the rising tension in the Red Sea. The major pair currently trades near 1.0938, losing 0.12% on the day. Later on Tuesday, the German inflation data and the ZEW Survey will be released.

Eurostat revealed on Monday that the Industrial Production across the euro area remains weak. The figure came in at -0.3% MoM in November from -0.7% in the previous reading. On an annual basis, Industrial Production fell 6.8% YoY in November from the previous reading of a 6.6% drop. The Production figure fell in both Germany and Italy, which exerts some selling pressure on the EUR and acts as a headwind for the EUR/USD pair.

Additionally, the European Central Bank (ECB) policymaker Joachim Nagel said on Monday that it’s premature for the central bank to discuss cutting interest rates because inflation remains high. Nagel added that they may need to wait for new data, and interest rate decisions would be made on a meeting-by-meeting basis.

Across the pond, a dovish tilt in the Federal Reserve’s (Fed) stance might cap the upside in the US Dollar (USD). The Fed policy rate currently stands in the 5.25%–5.50% range after 525 basis points (bps) of rate hikes since March 2022. Investors anticipate rate cuts coming as early as March 2024.

Moving on, market players will keep an eye on the German inflation data on Tuesday, as measured by the Consumer Price Index (CPI) for December. Also, the ZEW Survey from Germany and the Eurozone will be published. On the US docket, the January US NY Empire State Manufacturing Index will be due and Fed’s Christopher J. Waller is set to speak later in the day.