EUR/USD weakens below 1.1800 ahead of German IFO survey release

• EUR/USD softens to near 1.1800 in Wednesday's Asian session. 
• Fed's Powell renewed caution on inflation risk. 
• France's S&P Global PMI is experiencing its most severe contraction in five months. 

The EUR/USD pair edges lower to around 1.1800, snapping the two-day winning streak during the Asian trading hours on Wednesday. The downtick of the major pair is pressured by a rebound in the US Dollar (USD) after the Federal Reserve (Fed) Chair Jerome Powell's speech. The German IFO survey will be the highlight later on Wednesday.

Fed Chair Jerome Powell struck a cautious tone on further easing on Tuesday, which provide some support to the Greenback. Powell said the US central bank needs to continue balancing the competing risks of high inflation and a weak job market in its coming policy decisions. He further stated that policymakers likely have a difficult road ahead as they weigh further interest-rate cuts. 

"Powell's overnight remarks underscored the central bank's cautious approach," said James Kniveton, senior corporate forex dealer at Convera. Traders slightly pared back bets for a Fed rate cut by year-end to about 33%, according to LSEG data. Markets continue to expect no change to policy in the October meeting.

Across the pond, political uncertainty and concerns over the economic downturn in France, the second-largest economy within the Eurozone, could weigh on the shared currency. The HCOB Flash France Composite Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 48.4 in September from 49.8 in August. This figure registered its most severe contraction in five months. Meanwhile, both the manufacturing and services sectors declined sharply in September. 

"That stands in contrast to Germany, where service activity picked up according to the PMI. With heightened political uncertainty, the French economy appears to be mirroring this sense of instability," said Bert Colijn at ING.