EUR/USD trades at 1.1150 as Eurozone inflation hits a 4% three-year high and ECB officials signal potential December tightening, overshadowing strong US jobs data.
ECB policymakers including the German and Italian central bank heads signal a possible December rate hike, while Eurozone inflation hit a three-year high of 4% in October, supporting the Euro. The Dollar also failed to gain from strong US data (NFP 165,000 vs 65,000 consensus) as US Treasury yields and Fed hike expectations fell. The pair rose to around 1.1150, though Tuesday's US CPI and Friday's PPI could reverse the move.
Despite strong October jobs data (NFP 165,000 vs 65,000 expected, unemployment down to 4.1%) and near-80% CME FedWatch odds of a December rate hike, the Dollar failed to capitalize. ABN Amro strategists note the USD struggled to benefit as US Treasury yields and Fed hike expectations fell, limiting its upside even in risk-off conditions.
The EUR/USD pair climbed to 1.1150 on Monday as ECB policymakers hinted at a potential interest rate hike in December. Despite strong US October Nonfarm Payrolls of 165,000 and near 80% odds of a Fed hike, the US Dollar weakened as Treasury yields and rate expectations retreated. Investors now look to Tuesday's US CPI and Friday's PPI reports for further market direction.
The pair is climbing because several ECB policymakers, including the German and Italian central bank heads, hinted a December rate hike is likely, and Eurozone inflation hit 4% in October. At the same time, the US Dollar is weakening even though odds of a Fed hike in December are near 80%.
Stronger US data could lift the Dollar and push the pair back down. Investors are watching Tuesday's US CPI report and Friday's PPI for signals on the Federal Reserve's next policy decisions.
The Dollar has been unable to draw support even from risk aversion, with US Treasury yields and Fed hike expectations retreating, which limits its upside despite strong October employment figures.