EUR/USD posts a modest gain around 1.0725 amid the weakening US Dollar.

US Treasury Secretary Janet Yellen said that the US can manage inflation without hurting the employment market.

The market anticipates the European Central Bank (ECB) will maintain interest rates unchanged at its policy meeting on Thursday.

Market players await the US Consumer Price Index (CPI), ECB interest rate policy meeting.

The EUR/USD pair recovers some lost ground around 1.0725 after bouncing off the low of 1.0697. The rebound of the major pair is bolstered by the downward pressure on the US Dollar. Meanwhile, the US Dollar Index (DXY) corrects Lower to 104.70.

US Treasury Secretary Janet Yellen said on Sunday that she is becoming more convinced that the US will be able to curb inflation without causing major impacts on the labor market. She added that every gauge of inflation is erasing and there was no massive wave of layoffs.

The upbeat US economic data last week lends support to the higher for longer interest rate narrative in the US. The markets have been priced in the possibility of a 93% chance of a rate hold at the September meeting and a 43.5% chance of a rate hike at the November meeting, according to the CME FedWatch Tool. This, in turn, might lift the US Dollar (USD) and cap the upside of the EUR/USD.

The Fed Governor Christopher Waller said that the Fed has extra room to raise interest rates, but the data will determine it. While, Fed Boston President Susan Collins pointed out the risk of an inappropriately restrictive monetary policy stance and called for a patient and careful, but deliberate policy. Chicago Fed President Austan Goolsbee outlined the central bank's goal of leading the economy into a "golden path." This route represents a scenario in which inflation falls without causing a recession.

On the Euro front, analysts believe the European Central Bank (ECB) will maintain interest rates unchanged at its next policy meeting on Thursday. Destatis data released on Friday indicated that the German Harmonised Consumer Price Index (HICP) for August came in at 6.4% YoY, as expected by the market, while the core CPI remained steady at 6.1%. Furthermore, Eurozone GDP increased by 0.1% in the second quarter (Q2), compared to 0.3% in the previous quarter and 0.3% estimated.

On Wednesday, investors will closely watch the release of the US Consumer Price Index (CPI) for August. The monthly figure is anticipated to increase by 0.5%, while the monthly core figure is anticipated to remain unchanged at 0.2%. On Thursday, the focus will shift to the ECB's monetary policy. The event could provide the EUR/USD pair with a clear direction

EUR/USD POSTS MODEST GAINS AROUND 1.0725 AMID THE WEAKER USD, INVESTORS AWAIT US CPI, ECB RATE DECISION