EURUSD recovery extends past 1.0300 with dollar in freefall

• The euro continues to recover ground and reaches new all-time highs above 1.0300.
• Hopes of a softer rate hike from the Fed have weighed on the dollar.
• EUR/USD could hit 1.05 but is seen at 0.97 in three months — Nordea.

The euro remains strongly offered for the second consecutive day due to the weakness of the dollar. The pair has broken above the 1.0300 level to hit new three-month all-time highs and close in on August’s high of 1.0365.

Inflation data in the US sends the dollar crashing

The common currency is up more than 3% in the past two days, with the US dollar hit by a softer-than-expected US inflation release, and on track to close out its best weekly performance in more than two years.

Consumer prices accelerated to a 7.7% annual pace in October, below the 8.2% rise recorded in September and the 8% reading expected by the market. These figures suggest that inflationary pressures are starting to ease, clearing the way for the US Federal Reserve to ease its foot on the accelerator on rate hikes over the next month.

Hopes of some Fed easing have boosted risk appetite, which has helped equity markets, causing the dollar and US Treasuries to fall sharply.

In addition, news that Chinese authorities have decided to relax their strict COVID-19 restrictions and shorten quarantine periods has eased fears about a new round of lockdowns next winter and further boosted market sentiment. .

EURUSD could hit 1.05 but is seen at 0.97 in three months — Nordea

However, analysts at Nordea Bank are skeptical about the sustainability of the current euro bullish trend: Although EURUSD could rise until early December, we continue to see EURUSD lower by 0.97 in three months (…) The fight The Fed’s fight against inflation is not over yet given high wage growth and labor market tightness (…) EUR/USD interest spreads likely to move in favor of lower EURUSD.

Technical levels to watch