- EUR/USD was unable to hold on to gains above 0.9900 despite economic data from the Eurozone justifying further rate hikes.
- The Federal Reserve’s monetary policy meeting halted the euro’s rise at the start of the week.
- Inflation in the bloc jumped surprisingly above 10.5%, despite the ECB raising rates by 75 basis points in two consecutive meetings.
The euro continues its free fall against the dollar, testing the 50-day EMA around 0.9886, amid mixed sentiment on the November Fed meeting, which is expected to see for the US central bank to raise rates by 75 basis points. However, expectations of a Fed pivot on US recession fears intensified, keeping investors on their toes. At the time of this writing, the EUR/USD pair is trading at 0.9890.
The euro loses ground against the dollar, despite the fact that the inflation figures justify the additional adjustment of the ECB
Stocks in the US reflect a more subdued market mood as traders brace for the Federal Reserve. US economic data revealed the Chicago PMI and the Dallas Fed Manufacturing Index, both for October, disappointing investors. The Chicago PMI missed expectations and came in at 45.2, lower than the previous reading. Later, the Dallas Fed manufacturing index slumped to -19.2, disappointing estimates, showing business conditions deteriorating for the sixth month in a row.
Meanwhile, the Eurozone reported German inflation, which surprised sharply to the upside in October at 11.6% yoy, above estimates of 10.9%, weighing on the bloc’s figures. For its part, the Harmonized Index of Consumer Prices (HICP) for the Euro zone rose by 10.7% year-on-year, beating forecasts of 10.3%, but the underlying figures remained unchanged. Core IPCA rose 5% year-on-year, according to estimates.
On the other hand, the dollar index, which measures the value of the dollar against a basket of six currencies, rises 0.77% and stands at 111,523, thanks to the increase in US Treasury yields, before the imminent decision of the Fed .
CME’s FedWatch tool estimates there is an 86% chance the Fed will raise rates by 75 basis points, while for December traders are split between 50 and 75 basis points. Notably, the odds of a further ¾ percentage point hike increased from 43.4% to 49.5%, and those of 50 basis points dropped from 48% to 44%.
What must be considered
The EU economic calendar will be light, with Germany reporting Import Prices for September. By contrast, in the US, the Manufacturing PMI and JOLTs Job Openings report for October will be released, with both figures estimated at 50 and 10 million, respectively.
EUR/USD Key Technical Levels
Source: Fx Street
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