Euro collapses below 1.12 as Fed hawkish rhetoric lifts the US Dollar

EUR/USD sheds 0.40%, breaking below the psychological 1.1200 level.
Fed's Hammack advocates higher rates as inflation pressures broaden.
WTI climbs above $93 ahead of crucial US inflation releases.

The Euro extends its losses against the US Dollar on Monday, even falling below the psychological 1.1200 level as sellers step in following hawkish comments from a Fed policymaker and growing geopolitical concerns on two fronts: the US-Iran war and Russia’s invasion of Ukraine. The EUR/USD trades at 1.1155, down 0.40%.

EUR/USD tumbles towards 1.1150 as geopolitical tensions reinforce US inflation concerns

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The Columbus Day holiday kept the markets quiet, with the cash markets closed. But over-the-weekend news, with US President Trump announcing a ceasefire in the Russia-Ukraine war on energy facilities, was cheered by investors, who later scrambled to buy Oil as Ukraine’s President Zelenskyy warned that hostilities will remain if Russia attacks infrastructure.

Tensions in the Hormuz remain high, even though Iran revealed that the US agreed, in some form, to the seven conditions Tehran required to reopen the Strait. This pushed West Texas Intermediate (WTI) higher, with WTI ending Monday’s session up over 1.60% at $93.17.

The US economic docket was absent, yet eyes were on Cleveland Fed President Beth Hammack, who commented that higher rates are needed as inflation broadens and that, within the FOMC, she has one of the highest projections for the neutral rate.

Ahead this week, traders' focus will be on Fed speakers, led by Fed Chair Kevin Warsh, and on the release of US inflation figures, with the Consumer Price Index (CPI) expected on October 14, followed by the Producer Price Index (PPI) on October 15.

In the European Union, investors would target the release of Germany’s Harmonized Index of Consumer Prices (HICP) and speeches by European Central Bank (ECB) members Elderson and Escriva.

EUR/USD Price Forecast: Technical outlook

Chart Analysis EUR/USD — EUR/USD daily chart

In the daily chart, EUR/USD trades at 1.1157, extending a bearish phase as spot holds well below the clustered simple moving averages (SMA) group around 1.1496. The pair also remains under the long-running downward resistance trend line, whose break reference near 1.1295 now acts as an additional cap, while the Relative Strength Index (RSI) at about 22 stays deep in oversold territory, hinting that sellers remain in control even if short-lived corrective rebounds become more likely.

On the topside, initial resistance emerges near the former break area of the descending trend line around 1.1295, ahead of the dense 50-, 100- and 200-day SMA band at roughly 1.1496, which reinforces the broader bearish structure. Further up, the horizontal barrier at 1.1849 represents a more distant obstacle whose recovery would be required to alleviate the medium-term downside pressure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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