The EUR/USD pair ended its five-day winning streak on Tuesday and weakened from Monday's high of 1.1735, trading just below 1.1700 at the time of writing at the European open. Investors are hesitant ahead of the release of preliminary Eurozone Consumer Price Index (CPI) figures, but so far, downside attempts have been limited. The US dollar (USD) weakened amid growing concerns about the independence of the US Federal Reserve (Fed).

Eurozone inflation is expected to remain stable near the European Central Bank's (ECB) 2% interest rate target, further justifying the bank's decision to keep interest rates unchanged at its September meeting. Stronger-than-expected manufacturing activity data seen on Monday and comments from ECB board member Isabel Schnabel support this view.

On the other hand, the war between US President Donald Trump's administration and the Fed is eroding the credibility of the previous administration and driving investors away from the US dollar (USD) at a critical time when the bank is set to resume its interest rate cutting cycle.

Recent comments by US Treasury Secretary Scott Bessent that "the Fed has made a lot of mistakes" have failed to ease market concerns, which are already worried about Trump's efforts to replace committee members with pessimistic loyalists, which has led to the possibility of a lengthy legal battle with Fed Chair Lisa Cook.

On the US economic calendar, manufacturing and services activity data, as well as the all-important Nonfarm Payrolls report, due on Friday, will be key tests of Trump's trade policy and provide further clues about the Fed's monetary policy decision in September. (alg)

Source: FXstreet