EUR/USD slips before Fed minutes: dollar and oil in focus
Dollar index at 102.13, EUR/USD at 1.1192: oil, yields and the Fed minutes weigh on the euro. Scenarios and key levels.
Key Takeaways
- The dollar index rises 0.3 percent to 102.13 ahead of the Fed minutes.
- EUR/USD trades near 1.1192, pressured by oil prices and bond yields.
- Markets price a December hike at 68.6 percent, more likely than October.
The dollar is gaining again on Wednesday while the euro slips. According to FinChannel, the dollar index (DXY) climbs 0.3 percent to 102.13 as investors wait for the minutes of the U.S. central bank's September meeting. EUR/USD trades around 1.1192.
Dollar and oil weigh on the euro
The day's driver is a combination of rising yields and firmer oil. According to StoneX analyst Fawad Razaqzada, Brent is recovering from an intraday drop of about 3 percent and is back above $100 a barrel, on lingering concerns around the Strait of Hormuz. Expensive oil feeds inflation worries, which supports the dollar against the euro.
Some relief comes from Europe. Narrower yield spreads on French government bonds give the euro some footing, in StoneX's view. Razaqzada sees that as a temporary breather, not a turning point.
The Fed still sets the tempo
The minutes of the September 15-16 meeting are due this evening at 8 p.m. German time. At that meeting the Fed raised its policy rate by a quarter point to 3.75-4 percent, and all twelve voting members backed the decision. Fed Chair Kevin Warsh did not consider overall financial conditions restrictive, and per FinChannel the committee largely shared that view.
The data behind it is mixed. The U.S. economy added only 29,000 jobs in September, and unemployment stands at 4.2 percent. Wage growth remains moderate at 0.1 percent per month and 3 percent per year. The Fed's PCE inflation projection for 2026 is 3.7 percent, far above the 2 percent target. According to StoneX, four policymakers recently expected two more hikes this year.
Futures markets are positioned accordingly: for the October 27-28 meeting they price a hike at 21.6 percent, for December at 68.6 percent. Razaqzada considers the bar for a dovish surprise in the minutes high, because the Fed's rate path already came out restrictive.
What momentum says
Momentum signals a predominantly negative picture for EUR/USD. On the one-hour, one-day and one-week timeframes the state is bearish; on the four-hour timeframe it is neutral. The daily score stands at -0.76. The snapshot was taken at 1:37 p.m. German time at a price of 1.1192.
Scenarios
If the minutes turn out hawkish as expected and Brent stays above $100, StoneX points to 1.1085 as the next level, followed by the round 1.1000 mark.
If the market instead reads the minutes as a hint of a pause, EUR/USD could return toward resistance at 1.1260. That would require oil and yields to ease at the same time.
This article is not investment advice.