• The EUR/USD could not cling to gains above 0.9900 despite Euro area economic data, justifying additional rate hikes.
• The Federal Reserve monetary policy meeting put a lid on the Euro’s rise as the week begins.
• Inflation in the bloc jumped surprisingly above 10.5%, despite that the ECB hiked rates by 75 bps in two consecutive meetings

The Euro continues its free-fall against the US Dollar, testing the 50-day Exponential Moving Average (EMA) at around 0.9886, amidst a mixed sentiment of the November’s Fed meeting, where the US central bank is foreseen to hike rates by 75 bps. However, expectations for a Fed pivot as US recession fears escalated, keeping investors on their toes. At the time of writing, the EUR/USD is trading at 0.9890.

The Euro loses ground against the US Dollar, albeit inflation figures justifying additional ECB tightening

Equities in the US reflect a dampened market mood as traders brace for the Federal Reserve. The US economic data revealed the Chicago PMI and the Dallas Fed Manufacturing Index, both October readings, and disappointed investors. The Chicago PMI missed expectations at 45.2, less than the previous reading. Later, the Dallas Fed Manufacturing Index plunged to -19.2, lower than estimates, showing business conditions deteriorating for the sixth consecutive month.

In the meantime, the Eurozone reported inflation for Germany, which sharply surprised the upside in October by 11.6% YoY, above estimates of 10.9%, weighing on the bloc’s figures. Meanwhile, the Eurozone Harmonized Index of Consumer Prices (HICP) rose by 10.7% YoY, exceeding forecasts of 10.3%, but core figures kept unchanged. The core HICP increased by 5% YoY, as estimated.

Elsewhere, the US Dollar Index, a gauge of the buck’s value against a basket of six currencies, soars 0.77%, at 111.523, underpinned by higher US Treasury yields, as the Fed’s decision looms

The CME FedWatch Tool estimates an 86% chance for a Fed 75 bps rate hike, while for December, traders are split between 50 and 75 bps. Worth noting that the odds for another ¾ percent raise increased from 43.4% to 49.5%, with 50 bps sliding to 44% from 48%.

What to watch

The EU’s economic docket would be light, with Germany reporting Import Prices for September. Contrarily, the US calendar will reveal the ISM Manufacturing PMI and the JOLTs Job Opening report for October, with both figures estimated at 50 and 10 million, respectively.

EUR/USD Key Technical Levels