The EUR/USD pair continued its decline towards the 1.1600 level, influenced by a robust dollar and a trend of cautious positioning in anticipation of significant U.S. inflation data scheduled for later this week. The euro’s initial advances diminished as market participants responded to weak Eurozone fundamentals, ongoing political instability in France after its A+ credit rating downgrade, and new indications of strength in the U.S. economy. The pair is presently trading around 1.1628, reflecting a decline of 0.24%, following its inability to maintain bids above 1.1670, a level constrained by the 200-period exponential moving average on intraday charts.
Market participants are factoring in a 25-basis-point rate cut by the Federal Reserve at the forthcoming meeting on October 29, with a nearly 95% likelihood of a further adjustment in December. However, the crucial inflation data set to be released on October 24 may significantly alter projections. Market expectations indicate that the headline U.S. CPI is anticipated to increase to 3.1% year-over-year, a rise from the previous 2.9%, with core CPI also forecasted at 3.1%. An increase in the print would compel traders to reduce easing expectations, strengthening the dollar and exerting additional pressure on EUR/USD, potentially driving it closer to the 1.1550–1.1500 range. During the blackout period, Fed officials have abstained from making public comments, resulting in rate expectations being entirely reliant on economic releases.
The euro’s decline indicates ongoing weakness in the macroeconomic indicators of the Eurozone. Germany’s producer prices decreased by 0.1% in September, highlighting a decline in industrial momentum. Meanwhile, the Eurozone current account surplus dropped significantly from €29.8 billion to €11.9 billion, indicating a slowdown in export performance. ECB President Christine Lagarde is anticipated to discuss inflation and growth risks later today; however, market participants continue to express doubt that mere verbal intervention can counteract the worsening fundamentals. Weak credit growth and stagnant manufacturing PMIs have solidified expectations that the ECB will sustain its current rate stance until the end of the year, thereby constraining the potential for euro appreciation.
The recent downgrade of France’s sovereign rating by S&P from AA- to A+ on Friday has reignited concerns regarding fiscal sustainability throughout the Eurozone. Investors are increasingly scrutinizing France’s heightened debt load—currently surpassing 111% of GDP—and its potential impact on the region’s overall credibility. ING analysts cautioned that “given the fragility of the French government, it’s too early to price out the French effect from the euro,” noting that political divisions could obstruct fiscal reform. Positive sentiment regarding U.S.–China trade negotiations contributed to the stabilization of the dollar, counteracting its earlier declines. Treasury Secretary Scott Bessent and Chinese Vice Premier Lifeng engaged in “productive” discussions, as President Donald Trump suggested that the proposed 100% tariff deadline might be extended to facilitate ongoing negotiations. The anticipated Trump–Xi meeting in South Korea in early November is increasingly regarded as a crucial event for global markets. The technical outlook for EUR/USD continues to indicate a bearish trend. The pair remains constrained beneath the 50-period EMA at 1.1650 and the 200-period EMA at 1.1662, establishing a downward trajectory that has persisted since early October. Immediate support is at 1.1599, with further levels at 1.1545 and 1.1480, while resistance is established at 1.1665 and 1.1720.