The Euro struggles near May 2025 lows as hawkish Federal Reserve commentary and a fully priced December rate hike keep the US Dollar supported, despite a slight pullback following higher-than-expected jobless claims.
The pair touched 1.1066, its weakest since May 2025, as hawkish Fed officials push December rate hike expectations, with a 0.3% core inflation print and a possible 50 bps move on the table. Meanwhile Rabobank warns ECB tightening beyond December looks unlikely and French political risk weighs on the euro. Friday's US PPI is the next test, which could extend dollar strength.
The dollar hit a fresh year-to-date high with the DXY at 103.08 as multiple Fed officials, including Hammack and Waller, back further tightening and markets fully price a December hike after 0.3% core inflation, with a 50 bps move possible. A slight pullback after jobless claims rose to 200K shows the move is data-dependent, so the bullish push is firm but not one-way ahead of Friday's PPI.
The Euro remains under pressure, trading near 1.1087 after hitting a May 2025 low of 1.1066. The US Dollar maintains strength as Fed officials signal further tightening, with markets fully pricing in a December rate hike following a 0.3% core inflation print. Meanwhile, ECB caution and French political uncertainty weigh on the Euro, with traders now awaiting Friday's US Producer Price Index for further direction.
Fed officials are calling for more rate hikes and traders fully price a December hike after core inflation came in at 0.3%, while the ECB is seen by analysts as likely to stop hiking after December, keeping the euro under pressure near levels last seen in May 2025.
Friday's US Producer Price Index is the next major data point; a softer print could ease Fed hike expectations and support the euro, while a hot one could push the pair to fresh lows.
Hawkish Fed commentary and a fully priced December rate hike support the dollar, with markets even expecting continued hikes into 2027, though softer labour data like this week's 200K jobless claims can trigger pullbacks.
Friday's US Producer Price Index is the next read on inflation and could confirm or challenge expectations for a December hike.