EUR/USD at 1.1085: Fed Bets Lift the Dollar
Hot US inflation fuels Fed hike bets: the dollar hits its highest since April 2025 and EUR/USD slips to 1.1085.
Key Takeaways
- EUR/USD slips to $1.1085 as the dollar index hits a 19-month high.
- Behind the dollar's strength is the question of whether the Fed hikes 25 or 50 basis points in December.
- The ECB is seen as nearly done raising rates, and the rate gap weighs on the euro.
Anyone who bet on the euro on Thursday is paying for two trading days: EUR/USD has lost about 1.3 percent since Tuesday and hovers at $1.1085, just above the $1.1067 low from Asian trading. That was the weakest euro since May 2025. The dollar index climbed to roughly 102.9 in parallel, its highest reading since April 2025.
A central bank that might suddenly speed up
The trigger was the October US price report. Headline prices rose 0.4 percent month over month versus the 0.3 percent expected, and core rose 0.3 percent versus 0.2 percent. Finanzmarktwelt noted how sharply the bond market reacted: the two-year yield jumped 13 basis points, equity futures slipped and gold fell.
What matters is who spoke up afterward. Christopher Waller, long seen as a dove on the Fed board, said, according to CNBC, that he would back a 25-basis-point hike at the December 8-9 meeting. If core inflation came in at 0.3 percent or higher, he said, double that size was conceivable, and that threshold was reached. Banks are following: Goldman Sachs expects another move in early 2027 after December, and PIMCO economist Tiffany Wilding wants hikes in both December and January.
Europe is on the brakes
The euro also faces the other side of the trade. Société Générale analyst Kenneth Broux expects the European Central Bank not to raise rates further after its December meeting. So while the Fed could add more, European tightening is ending. The rate gap is widening in the dollar's favor, and capital usually follows the higher yield.
The dollar's advance is not limited to the euro. The Australian dollar drops 0.45 percent to $0.6826, near a seven-month low. The dollar buys as much as 159.95 yen at one point, the most in over two months. Japan's top currency diplomat Atsushi Mimura warned, according to CNBC, that this summer's intervention has not been forgotten. Bank of Japan board member Toichiro Asada, on the other hand, played down hopes of a quick rate hike even though wholesale prices rose 7.1 percent year over year in October.
What momentum says
The momentum signals no uniform direction for EUR/USD: neutral on the hourly and daily timeframes, bearish on the 4-hour and weekly charts. The price was 1.1089 at the time of the snapshot.
Scenarios
If EUR/USD falls below 1.1067, the low of recent days would be broken, and further losses are possible as long as markets price in a faster Fed. If that level holds and the tone calms, for example during the evening appearance of New York Fed President John Williams, the pair returns above 1.11. The biggest influence is the December decision itself: a 50-basis-point move instead of 25 would be the less favorable variant for the euro.