• EUR/USD extends gains above the 1.1100 area amid sustained US dollar weakness.
• The US inflation data showed odds of further rate hikes by year-end have declined. 
• The European Central Bank (ECB) will likely hike more rates later in the month.
• Investors will await the US Producer Price Index (PPI) due later in the day. 

The EUR/USD pair is trading on the front foot, teasing a fresh 2023 top near 1.1150 in the early Asian session amid a broad-based US dollar weakness. 

The pair reached its highest level since March 2022 after breaking convincingly above the 1.1100 mark on Wednesday. Market players await the release of the Producer Price Index (PPI) due later in the day. 

The US Bureau of Labor Statistics (BLS) reported on Wednesday that the country’s Consumer Price Index (CPI) dropped to 3% YoY in June from 4% in May. This figure was slightly below the market anticipation of 3.1%. Meanwhile, core CPI inflation, excluding volatile food and energy costs, fell to 4.8% from 5.3%. On a monthly basis, both CPI and core CPI gained 0.2%, missing analysts' expectations.

In response to the softer inflation reports, the US Dollar came under renewed selling pressure. The US Dollar Index (DXY), a gauge of the performance of the Greenback against a basket of six major currencies, hit its lowest since April 2022, just above the 100.50 area.

The inflation data showed signs of easing inflationary pressure in the US economy. The next Federal Open Market Committee (FOMC) meeting is scheduled for July 25-26, and the market anticipates a rate hike at that meeting. However, the odds of further rate hikes by year-end have declined significantly.

Across the pond, the ECB remains hawkish and will likely raise its policy rates by a quarter percentage point later in the month due to persistent inflationary pressure in the euro area. The final inflation figure, measured by the Consumer Price Index (CPI) in Germany for June, rose by 0.3% MoM, while final inflation in Spain rose 1.9% in the year to June.

Looking ahead, investors will keep an eye on another US inflation data on Thursday. The Producer Price Index (PPI) is estimated to drop from 6.6% to 6.1% annually, while the core figure is expected to decline from 5.3% to 4.8%. Also, the European Central Bank (ECB) will release the minutes of its latest meeting on Thursday