EUR/USD stays firm on US recession risks, US inflation in focus

• EUR/USD shows resilience near 1.0900 as US recession risks keep the US Dollar on the backfoot.
• US Commerce Secretary Lutnick sees President Trump's policies as worthwhile despite they may lead to a recession.
• The Euro capitalizes on hopes of Ukraine's ceasefire for 30 days and German debt restructuring plans.

EUR/USD ticks lower but stays near a five-month high, trading at 1.0920 in European trading hours on Wednesday. The major currency pair remains firm as the US Dollar (USD) is broadly on the backfoot due to increased concerns over the United States (US) economic outlook under the leadership of President Donald Trump. 

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, rises slightly after gauging temporary support near an over four-month low of 103.35.

The US Dollar underperforms as US President Trump's tariff agenda has fuelled risks of an economic recession in the near term. Market participants expect Trump's "America First" policies to boost inflationary pressures, eventually diminishing the purchasing power of households already battling high inflation.

Meanwhile, fears of a US recession escalated after comments from US Commerce Secretary Howard Lutnick in a CBS interview on Tuesday indicated that policies by the President are worthwhile despite they had prompted fears of a recession. Lutnick said, "These policies are the most important thing America has ever had, and they are worth it" after being asked whether it would be worth executing Trump's policies even if they led to a recession.

On the domestic front, investors await the US Consumer Price Index (CPI) data for February, which will be published at 12:30 GMT. Investors will pay close attention to the US inflation data as it will influence market speculation over the Federal Reserve's (Fed) monetary policy outlook. Year-over-year headline inflation data is estimated to have decelerated to 2.9% from the 3% increase seen in January. In the same period, the core CPI - which excludes volatile food and energy prices - is expected to have risen by  3.2% compared to the prior release of 3.3%.

Daily digest market movers: EUR/USD gains as Ukraine agrees to an immediate 30-day ceasefire

• EUR/USD has been advancing for over a week as the Euro (EUR) is outperforming on optimism over the German defense spending deal. Hopes for a clearance to German debt restructuring to boost defense spending accelerated after Franziska Brantner-led-German Green Party agreed to negotiate with likely next Chancellor Friedrich Merz and Social Democratic Party's (SDP) co-leader Lars Klingbeil in a scheduled meeting on Thursday.
• Market participants expect that widening the German "debt brake" could be a game-changer for the Eurozone economy, assuming that the monetary stimulus will stimulate economic growth. Such a scenario would also force the European Central Bank (ECB) officials to reassess their monetary policy path. The ECB had been guiding that the interest rate path is clearly on the downside.
• Additionally, the acceleration in optimism over peace in Ukraine has increased the Euro's appeal. On Tuesday, Ukraine agreed to an immediate 30-day ceasefire in a meeting with US officials in Saudi Arabia. US Secretary of State Marco Rubio said he would now take the offer to the Russians, Reuters report. 
• Meanwhile, tariff policies by US President Trump continue to be a nightmare for the Euro. Trump's tariff policies keep him in a dominant position while negotiating deals with his trading partners. On Tuesday, Canada's Ontario Premier, Doug Ford, rolled back the 25% surcharge levied on electricity exported to the US after Trump threatened to increase levies on steel and aluminum imports from Canada to 50%.

Technical Analysis: EUR/USD wobbles inside Tuesday's trading range

EUR/USD stays firm near 1.0900 and trades inside Tuesday's trading range on Wednesday. The major currency pair strengthened after a decisive breakout above the December 6 high of 1.0630 last week. The long-term outlook of the major currency pair is bullish as it holds above the 200-day Exponential Moving Average (EMA), which trades around 1.0650.

The 14-day Relative Strength Index (RSI) jumps to near 75.00, indicating a strong bullish momentum.

Looking down, the December 6 high of 1.0630 will act as the major support zone for the pair. Conversely, the psychological level of 1.1000 will be the key barrier for the Euro bulls.