EUR/USD has pulled back to the 1.1800 area at the time of writing on Wednesday, from weekly highs near the 1.1820. The pair, however, remains looking for direction within a tight range, both sides of the 1.1800 level for the second consecutive day, as investors remain reluctant to take excessive risks.

US data released on Tuesday revealed that business activity slowed down for the second consecutive month in September, in line with expectations. The S&P Global's report suggested that tariffs are pushing costs higher, while a weak demand and fierce competition limit firms' ability to raise prices, which rose at their slowest pace since April.

Somewhat later, the Federal Reserve (Fed) Chairman, Jerome Powell, reiterated the bank's challenges to set the correct monetary policy to combat higher inflation risks without damaging the labor market further. Powell maintained his cautious stance on further monetary easing, but he failed to alter the market's view that the central bank will cut interest rates in each of the two remaining monetary policy meetings this year.

In Europe, preliminary Purchasing Managers Index (PMI) figures showed mixed data, with a larger-than-expected improvement in services activity offsetting the unexpected contraction in the manufacturing sector, weighed by a sharp drop in new orders.

The economic calendar is lighter on Wednesday. During the European morning, the German IFO Business Climate will be the main data release, while the US August's New Home Sales and a speech from San Francisco Fed President, Mary Daly, will gather the market's attention during the American session.

Source: FXstreet