EUR/USD Pressured By Hawkish Fed

EUR/USD is trading around 1.1200 after another decline on Wednesday. Minutes from the Federal Reserve’s September meeting showed that most policymakers still see further tightening as likely before year-end, while renewed concerns over French public finances continue to weigh on the euro. The dollar index remains near 102.23, close to an 18-month high.

3 Takeaways

- EUR/USD is trading near 1.1200 after falling around 0.6% in the previous session.

- Markets see only about a 19% probability of an October Fed rate hike, but roughly an 80% chance of a move in December.

- US weekly jobless claims are the main macro release today.

Current movement

The euro came under renewed pressure on Wednesday and moved closer to the recent 1.1161 low. French government bonds weakened again on fiscal concerns, while elevated US Treasury yields continued to support the dollar.

The 10-year Treasury yield is around 5.30% after touching 5.326%, its highest level in roughly 24 years.

The FOMC minutes provided another source of support for the dollar. Despite weaker September employment data, most policymakers still believe another rate hike before the end of the year may be appropriate.

Main macroeconomic driver

The Fed minutes showed that inflation remains the central bank’s main concern. Almost all participants viewed inflation risks as tilted to the upside, although policymakers differed over the rationale behind September’s rate increase.

Markets still expect the Fed to pause at its 27–28 October meeting. The probability of an immediate rate hike is only around 19%, while a December increase remains the base case.

Today, attention turns to US weekly jobless claims. The consensus expects around 200,000 initial claims versus 197,000 in the previous week. Strong data could provide further support for the dollar, while a clear deterioration would strengthen the case for a longer Fed pause.

Central banks

EUR/USD is caught between softer expectations for the October Fed meeting and a central bank that is not yet ready to declare the tightening cycle over.

At the same time, France’s fiscal problems continue to limit the euro’s upside. Bank of France Governor Emmanuel Moulin described the economic situation as serious, although he said the country does not currently need ECB assistance.

Technical outlook

Key support remains near 1.1160. A sustained break below this level would increase downside pressure and bring 1.1065 into focus.

Initial resistance is located around 1.1220–1.1250. EUR/USD would need to recover above 1.1250 for the short-term technical picture to improve.

FAQ

Why is the euro falling again?

The dollar is supported by hawkish Fed minutes and elevated Treasury yields, while French fiscal risks continue to weigh on the euro.

Will the Fed raise rates in October?

Markets assign only around a 19% probability to an October hike. A December move is currently considered much more likely.

Which levels are key?

Support is at 1.1160 and 1.1065. Resistance is at 1.1220–1.1250.