US Dollar Falls Early Wednesday Ahead of Fed Official Appearances, Weekly Oil Stocks Inventory Data

is back to trading close to the 1.120 mark, entirely driven by the swings in the US dollar following the United States-China deal and consumer price index numbers, said ING.

The bank's one-month target for the pair is 1.12, on the view that markets will retain interest on short-USD positioning ahead of expected U.S. data deterioration, but that the euro isn't particularly well positioned to benefit from it as the European Central Bank continues to cut, and markets may look with more interest at higher beta currencies on the back of better risk sentiment.

In eurozone macro news, the ZEW expectations survey rebounded in May, showing increased hopes for U.S. trade deals, although the current situation gauge failed to show any recovery, stated ING.

The only data in the eurozone on Wednesday are some final CPI prints, and investors will hear from the ECB's Jose Luis Escriva, Joachim Nagel, Francois Villeroy de Galhau and Robert Holzmann. The bank expects some stabilization around 1.120 in over the coming days.

The United Kingdom's jobs market has continued to cool, pointed out ING. However, there hasn't been any sign of material deterioration after the April employer tax hike, and wage growth remains too high to make the Bank of England shift to a faster gear with monetary easing.

In short, the U.K. labor market is slowing, not collapsing, and that is translating into a steady fall in wage growth.

The BoE will want to see this trend continuing for a few more months before it becomes more confident on the wage story, added UNG. Until then, next week's services inflation number will be much more consequential, given that April's data is when the big annual price hikes kick in. ING thinks this could come in a little below the BoE's forecasts, which would help cement an August rate cut.

has now approached 0.840, and the bank reiterates its call for a break lower ahead of European Union-U.K. trade talks next Monday.

The Czech koruna (CZK) has been the bank's favorite currency within the Central and Eastern European region for the past two months, as it has shown strong resilience to global events.

ING continues to view it as a high-quality choice, but the central bank's (CNB) neutral stance on additional rate cuts has slightly dampened ING's optimism about the CZK last week. However, the market is still pricing in a terminal rate of around 3%, which is more rate cuts than in the bank's forecast.

In addition, risks are building more on the hawkish side in terms of inflation and the economy. Although ING could see a test of 25.00 in the coming days due to a jump in EUR rates, the bank retains the view that will head lower in the coming months.

There are a couple to take note of on the board for the day, as highlighted in bold.

The first one is for EUR/USD at the 1.1175 level. It's not one that holds any technical significance but could help to provide a floor for price action with the dollar coming back under pressure after the swing yesterday. Even though the strong buying momentum in equities continued, the greenback was left to suffer after the US CPI report.

The expiries above may help to keep price action somewhat underpinned at least, with EUR/USD buyers now testing the 100-hour moving average near 1.1200 going into the session ahead.

Then, there are ones for AUD/USD at the 0.6475 and 0.6500 levels. They don't hold much technical significance as well but the expiries could well act as magnetic poles in keeping price action more limited between the two levels in the session ahead.

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The euro held firm above the $1.11 mark on Tuesday, attempting to recover from a 1.5% drop on Monday, as investors digested stronger-than-expected German economic sentiment and a surprise decline in US inflation.

Germany’s ZEW Economic Sentiment Index jumped to 25.2 in May, well above the forecast of 11.9, reflecting growing optimism for the next six months attributed to the formation of a new federal government, progress in resolving trade disputes, and signs of stabilizing inflation.

In contrast, the U.S. dollar weakened after consumer price inflation eased to 2.3% in April—the lowest since February 2021 and slightly below expectations of 2.4%.

Core inflation held steady at 2.8% year-over-year, matching a four-year low.

Investors also continued to assess the impact of the recently announced U.S.-China tariff rollback, which temporarily reduces tariffs to 30% and 10%, respectively, for a 90-day period, as part of renewed trade negotiations.