EUR/USD remains under pressure, treads waters around 1.0720

• EUR/USD weakened due to the Eurozone’s downbeat economic data.
• Eurozone soft statistics increase the odds of the ECB shifting away from its hawkish stance.
• 10-year US bond yield rose by 1.85%; contributing to the strength of the US Dollar (USD).

EUR/USD hovers around 1.0720 during the Asian session on Wednesday, treading waters to snap the previous day’s losses. The pair is under pressure due to disappointing data from the Eurozone released on Tuesday.

Eurozone Producer Price Index (PPI) for July reduced to -0.5% on a monthly basis and -7.6% on an annual basis from -0.4% and -3.4% respective priors. Further, HCOB Composite PMI for August declined to 46.7 from the previous reading of 47, which was expected to remain unchanged.

The discouraging statistics have increased the likelihood of the European Central Bank (ECB) shifting away from its hawkish stance due to concerns about a potential recession. This is exerting downward pressure on the EUR/USD currency pair.

ECB President Christine Lagarde advocated that central banks maintain a strong anchor on inflation expectations. In a similar vein, Joachim Nagel, President of the Deutsche Bundesbank and a member of the ECB Council, also offered support for price stability but refrained from offering additional specifics at that time.

Furthermore, The Currency, an Irish business publication, published on Tuesday, an interview with ECB Chief Economist Phillip Lane on August 31. In the interview, Lane commended the softening of the August inflation data. Nevertheless, he emphasized the importance of maintaining such favorable statistics to resist the pressure from the more hawkish members of the ECB.

US Dollar Index (DXY), which compares the Greenback against six other major currencies, trades higher around 104.80 at the time of writing. the upbeat yields on US Treasury bonds help the buck to maintain its strength. The 10-year US Treasury yield rose to 4.26%, up by 1.85%.

However, United States (US) Factory Orders for July plummeted to their lowest levels since mid-2020, with a month-on-month decline of -2.1%, far below the anticipated -0.1%, and swinging from the 2.3% growth seen previously.

Fed Governor Christopher Waller told to CNBC that the decision to raise rates or halt rate increases would be contingent on the data. Waller also stated that data is indicating a favorable outlook for a soft-landing scenario, a sentiment that bolstered the strength of the US Dollar.

Market participants will likely watch the upcoming data scheduled to be released later in the day. These datasets include German Factory Orders and Eurozone Retail Sales for July. On the US docket, the US ISM Services PMI for August and US S&P Global PMIs are due. These releases will offer insights to strategize the bets on the EUR/USD pair.