EUR/USD depreciates to near 1.0800 ahead of GDP data from Eurozone, Germany

• EUR/USD inches lower ahead of key economic data from the Eurozone and Germany.
• The risk-sensitive EUR may further depreciate due to prevailing uncertainty surrounding the US presidential election.
• Traders will shift their focus to US Gross Domestic Product (GDP) and ADP Employment Change data later in the day.

EUR/USD loses ground after two days of gains, trading around 1.0810 during the Asian hours on Wednesday. The Euro receives downward pressure as the European Central Bank (ECB) is widely anticipated to reduce its Deposit Facility Rate once again. Money markets are currently pricing in nearly a 50% chance of a 50 basis point rate cut during the December meeting.

Investors will closely watch preliminary Gross Domestic Product (GDP) data from Germany and the Eurozone, as well as Germany’s preliminary Harmonized Index of Consumer Prices (HICP) data, which are scheduled for release on Wednesday. The focus will shift to the preliminary US Q3 Gross Domestic Product (GDP) figures and October's ADP Employment Change release on Wednesday.

Recently, ECB policymakers have expressed varying views on monetary policy. Pierre Wunsch, the Governor of the National Bank of Belgium, noted that there is no pressing need for the central bank to speed up interest rate cuts, suggesting it could even accommodate a modest rate. In contrast, Mario Centeno, Governor of the Bank of Portugal, advocated for considering a 50 basis point rate cut as a viable option for December.

The downside of the EUR/USD pair could also be attributed to the higher US Dollar (USD) amid improved Treasury yields. The US Dollar Index (DXY), which measures the value of the US Dollar against six other major currencies, trades around 104.30 with 2-year and 10-year yields on US Treasury bonds standing at 4.09% and 4.24%, respectively, at the time of writing.

The risk-sensitive EUR/USD pair may further depreciate amid ongoing uncertainty surrounding the US presidential election. A three-day poll conducted by Reuters/Ipsos, which concluded on Sunday and was released on Tuesday, indicated that the race is essentially tied as the November 5 election approaches.

Vice President Kamala Harris, the Democratic candidate, has seen her lead over Republican nominee Donald Trump narrow to just one percentage point, with 44% support compared to Trump's 43%.