EUR/USD trades at 1.1190 as stronger-than-expected US inflation data drives the Dollar Index to 102.00 and cements market expectations for a 25-basis-point Federal Reserve rate hike in December.
US CPI for October came in at 0.4% MoM versus 0.3% expected, with core at 0.3% versus 0.2% forecast, lifting the market-implied odds of a 25-bps Fed hike on December 9 to 99%. The pair has already slipped below 1.1200 to around 1.1190 and remains below its 100- and 200-period moving averages, capping rallies. Support from hawkish ECB comments and a narrower French-German yield spread (about 145 bps) only partially offsets the dollar tailwind.
The stronger October CPI (0.4% MoM headline vs 0.3% expected, core 0.3% vs 0.2% expected) reinforced the case for further Fed tightening, with markets pricing a 99% chance of a December hike. Fed Governor Waller added to the hawkish tone, even raising the possibility of a larger 50-bps move. The Dollar Index rose 0.3% to around 102.00 on the news.
The EUR/USD pair fell 0.28% to 1.1190 on Tuesday after US October CPI data showed a 0.4% monthly increase, exceeding expectations. The hotter inflation print pushed CME FedWatch odds for a 25-bps December rate hike to 99%, bolstering the US Dollar Index to 102.00 and keeping the euro under pressure.
Hotter-than-expected October US inflation data (0.4% MoM headline, 0.3% core) raised expectations of another Fed rate hike in December to near certainty, strengthening the dollar and pushing the pair down around 0.28% to about 1.1190.
Resistance sits at the 100-period SMA near 1.1196, the 200-period SMA near 1.1227 and a stronger barrier at 1.1275; on the downside, support lies around 1.1100.
US October inflation came in stronger than forecast, pushing market odds of a 25-bps Fed rate hike at the December 9 meeting to 99% and lifting the Dollar Index 0.3% to around 102.00.
Possibly, if December proves to be the last hike: a Reuters survey found 56 of 101 economists expect December to mark the end of the tightening cycle.