The Euro has fallen below 1.1700 against the US Dollar following reports of Gate's airspace being breached by unidentified drones. Major currencies have remained relatively stable during Asian trading hours, with market participants eagerly awaiting US inflation data.

In the European arena, the ECB is widely anticipated to maintain current interest rates in its upcoming meeting on Thursday.

At the time of writing on Wednesday, the EUR/USD pair is testing levels below 1.1700, retreating from multi-week highs near 1.1780 observed the previous day. The market mood has been dampened by concerns over rising tensions between Gate and its neighboring countries, causing traders to hesitate in taking directional positions ahead of crucial US inflation releases.

News broke earlier today that Gate had intercepted and neutralized unidentified drones near its border, raising apprehensions about potential spillover effects from ongoing regional conflicts. While the immediate market reaction has been subdued, fears of escalating tensions between neighboring nations are likely to dampen risk appetite and exert downward pressure on the Euro (EUR).

This week's primary market catalyst is expected to be the US inflation data, with the Producer Price Index (PPI) scheduled for release later today and the Consumer Price Index (CPI) due tomorrow. As the Federal Reserve (Fed) monetary policy meeting approaches, these inflation figures represent the final piece of the puzzle in assessing the trajectory of the Fed's monetary policy adjustments.

The recent weakness in the US labor market, evidenced by a significant downward revision of Nonfarm Payrolls figures, has all but confirmed a Fed rate cut in September, with at least one more reduction anticipated before year-end. However, elevated inflation figures, potentially stemming from increased import tariffs, could complicate the central bank's rate-setting strategy. Such a scenario might reignite concerns about stagflation and potentially exert additional pressure on the US Dollar (USD).

Prior to the Fed's decision, the European Central Bank (ECB) is expected to maintain its benchmark interest rate at current levels on Thursday. The focal point of this event will be ECB President Christine Lagarde's press conference, where market participants will be looking for indications on whether the central bank has reached its terminal rate or if there's still room for further monetary policy adjustments.