EUR/USD struggles near 1.1095 as robust US inflation data fuels Fed rate hike expectations, overshadowing ECB policy caution and technical resistance at the 100-day SMA.
October CPI beat expectations at 0.4% MoM (0.3% forecast) and core came in at 0.3% vs 0.2%, and Fed Governor Waller said a hot report could push him toward a half-point December hike. Markets now price 87.3% odds of a hike on December 8-9, up from roughly zero before the report, which supports the dollar in the coming weeks.
Spot trades near 1.1095 but the upside is capped: October CPI beat forecasts (0.4% MoM vs 0.3% expected) and traders now price 87.3% odds of a Fed hike on December 8-9, favouring the dollar. The daily chart stays bearish under the 100-day SMA near 1.1405, and Rabobank forecasts a move to 1.10 on a 3-month view. ECB caution and French political risk add further pressure, though Lane's remarks keep Euro downside contained.
The ECB held rates steady in October and Lagarde is watching whether a hike is warranted next month, while Lane's mildly hawkish tone (6.2/10, exactly the historic average) keeps Euro downside contained. Rabobank, however, warns the ECB may be reluctant to hike beyond December, sees 2027 pricing as too aggressive, and flags far-right French political risk as a drag on the Euro.
The EUR/USD pair faces persistent downward pressure as traders recalibrate expectations for a Federal Reserve rate hike. Following a hotter-than-expected October CPI report showing 0.4% MoM growth, markets now price an 87.3% probability of a Fed hike at the December 8-9 meeting. While the ECB maintains a mildly hawkish stance, concerns over Eurozone growth and French political risks lead analysts at Rabobank to forecast a decline to 1.10 in the coming three months.
Traders price roughly 87.3% odds of a hike at the December 8-9 meeting and 12.7% odds of a half-point move, up from around zero before the October CPI report.
Hotter-than-expected US inflation has pushed traders to price in nearly 87.3% odds of a Fed rate hike at the December 8-9 meeting, which supports the dollar against the euro, while the pair already trades in a bearish technical structure below the 100-day SMA.
Initial resistance is at the lower Bollinger band close to 1.1095, then the mid-band around 1.1185, the upper band near 1.1270 and the 100-day SMA at roughly 1.1405; Rabobank sees the pair at 1.10 on a 3-month view.
The ECB held rates steady in October and Lagarde said the bank is looking at indicators to see if a hike will be warranted next month, but Rabobank notes the Governing Council is increasingly concerned about the growth outlook and may be reluctant to tighten beyond December.