Euro edges towards the lower end of its range as US rate bets rise

• EUR/USD slips just below 1.1150 as most of Monday’s advance unwinds.
• US rates could stand two percentage points above the ECB’s 2.50% deposit rate.
• Two appearances by ECB President Lagarde precede Friday’s Eurozone GDP release.

Stronger-than-forecast US consumer prices have left the Euro in the lower half of the 1.1100-1.1300 trading range it has occupied for five weeks. After slipping just below 1.1150 and surrendering almost all of Monday’s advance, the currency has edged back above that level.

October’s core US consumer prices increased by 0.3%, exceeding the 0.2% forecast. With Dallas Fed President Logan calling for two further quarter-point rate rises before a pause, traders assign roughly a 74% probability to a second increase by January. Unless the European Central Bank (ECB) also raises rates, those two moves would leave US rates 1.75-2.00 percentage points above its 2.50% deposit rate.

While two Fed officials specified the size of their prospective rate moves, ECB Chief Economist Lane said he would require a high threshold to be met before signalling the next direction for ECB rates. Following a three-year high of 4% for Eurozone inflation in October, money markets are pricing in two ECB increases by mid-2027. Those moves would reduce the rate differential for the Euro.

ECB speeches and GDP lead the calendar

Wednesday’s appearance by ECB President Lagarde is scheduled for 09:45 GMT, followed by another on Thursday at 19:30 GMT. ECB Executive Board member Schnabel is due to speak on Friday at 07:10 GMT. The updated third-quarter Eurozone Gross Domestic Product (GDP) figures follow on Friday at 10:00 GMT, with growth forecast at 0.4%, unchanged from the initial estimate. Both the GDP release and ECB President Lagarde’s comments will help shape the question of whether the ECB also raises rates in December.

Thursday’s US schedule includes a speech at 14:00 GMT by Cleveland Fed President Hammack, who holds a vote this year. Attention then turns to Friday’s core producer price release at 13:30 GMT: the annual rate is expected to remain at September’s 5%, while a Fed rate increase on 9 December is already priced in.

Euro remains within its trading range

A decline of about 5% from the late-August peak near 1.1700 preceded the Euro’s entry into its current range. Repeated attempts to approach the upper boundary have ended in reversals, most recently on 5 November. At the lower end, the lows recorded on 14 October and 29 October stayed just above the range floor.

Daily EUR/USD price chart