Can the euro recover ground as German CPI confirms easing price pressures?

• Selling pressure takes EUR/USD to 1.1155 from Tuesday's mid-1.1200s highs, though the pair stays within its recent trading range.
• An easing of price pressures in October was confirmed by Germany's final HICP figures.
• Elevated inflation readings and hawkish commentary from Fed officials have lent strength to the US Dollar.

Selling pressure on the Euro (EUR) against the US Dollar (USD) persists for a second straight day on Wednesday, with Germany's final inflation figures offering no support. EUR/USD is trading at 1.1155, having pulled back from Tuesday's session highs just above 1.1250. The pair nevertheless holds within its earlier range, above the year-to-date lows around 1.1110.

A monthly decline of 0.1% and year-on-year growth of 2.8% in October were confirmed by the final German Harmonised Index of Consumer Prices (HICP), in line with preliminary estimates. In September, the corresponding increases stood at 0.6% and 3.3%, respectively.

Does US CPI Data Reinforce Expectations of Fed Tightening?

Against most of its peers, the US Dollar is gaining ground on Wednesday as stronger-than-forecast US Consumer Price Index (CPI) readings combine with hawkish remarks from Federal Reserve (Fed) officials. Together, these developments have all but confirmed a December rate hike by the central bank.

Higher food and accommodation costs drove a 0.4% rise in US consumer prices in October, exceeding the market forecast of 0.3%, according to figures from the US Bureau of Labor Statistics (BLS). A 0.3% increase in core inflation also surpassed expectations. Year-on-year figures, however, were not disclosed owing to the 2025 Federal Government shutdown.
A call for “further gradual tightening” to return inflation to target came from Philadelphia Fed President Anna Paulson on Wednesday. Dallas Fed President Lorie Logan followed a few hours later, saying that “it is clear that the Fed needs at least two more quarter-percentage-point  increases.”

Markets have consequently almost fully factored in a rate increase at the Fed's December 9 monetary policy meeting, including a 12% probability of a 50-basis-points hike. These expectations are lending broad-based support to the US Dollar.