EUR/USD eases to 1.1220 as the US Dollar gains on hawkish Fed expectations and rising CPI forecasts, while crude oil prices hit their lowest level since August on diplomatic optimism.
EUR/USD trades around 1.1220 in Asian hours on Tuesday, easing after modest prior gains as dollar strength builds. Markets price an 82% Fed rate-hike probability for December (up from 76%) ahead of October US CPI expected to rise to 3.9% headline and 2.8% core. Euro-side pressure from French political-fiscal instability and uncertainty over ECB President Lagarde's possible early departure adds to the bearish case.
The dollar is gaining ground despite easing geopolitical risk from potential US-Iran diplomacy, a sign of genuine underlying demand. December Fed rate-hike odds rose to 82% from 76% after last week's Nonfarm Payrolls, and Fed officials Barkin and Goolsbee struck hawkish tones on inflation. Hotter October CPI (3.9% expected vs 3.7% prior) would reinforce the bullish case.
Crude prices fell to their lowest levels since August on optimism over diplomatic efforts to end the Middle East conflict. President Trump said further strikes on Iran might not be necessary while calling Iran 'militarily, effectively over', reducing supply-disruption risk. Continued regional attacks and the US staying 'locked and loaded' cap the downside.
The EUR/USD pair trades near 1.1220 as the US Dollar strengthens ahead of Tuesday's October CPI report. Markets have increased the probability of a December Federal Reserve rate hike to 82%, up from 76% last Friday, while the Euro faces additional pressure from French political instability and uncertainty surrounding ECB President Christine Lagarde.
The pair trades around 1.1220 as the dollar gains on rising expectations of a Fed rate hike in December — 82% odds per CME FedWatch — and ahead of October CPI expected at 3.9%, while the Euro is pressured by French political-fiscal instability and uncertainty over ECB President Lagarde's possible early departure.
The article notes that lower crude oil prices and stabilizing market sentiment after last week's turbulence could offer the Euro some underlying support moving forward.
Markets now see an 82% chance of a Fed rate hike in December (up from 76% last Friday) after last week's Nonfarm Payrolls, Fed officials have turned hawkish on inflation, and traders await October CPI expected at 3.9% headline.
It would normally dampen safe-haven demand, but the article notes the dollar is gaining anyway, and President Trump kept the 'locked and loaded' stance while calling Iran 'militarily, effectively over'.
Crude has dropped to its lowest level since August as optimism grows over diplomatic efforts to end the Middle East conflict, with President Trump signaling further strikes on Iran might not be necessary.
The article notes regional attacks continue and the US remains 'locked and loaded', so renewed escalation could reverse the diplomatic-optimism driven decline.