EUR/USD dipped on Monday as the US Dollar rebounded ahead of this week’s Federal Reserve and European Central Bank rate decisions, while France’s deteriorating fiscal backdrop and bond-market strains added pressure on the single currency. The pair traded near 1.1183, down 0.17% on the day, as the US Dollar Index (DXY) stood around 101.99 after touching 101.45 last week, its lowest since 1 October. Policymakers are expected to keep rates unchanged on Wednesday and Thursday respectively, with inflation still above 2% targets and energy costs elevated due to Middle East tensions. Markets are pricing potential rate rises in December, so forward guidance may move pricing more than the decisions themselves.
Eurozone Inflation Pressures and French Bond Spreads
Oil’s rise is in focus because it can weigh more heavily on euro-area inflation and activity, while short-term inflation expectations have risen faster in the Eurozone than in the US without a matching shift in relative rate expectations. French spreads have widened, but this has not yet translated into broader Eurozone stress, alongside expectations the ECB could act if contagion threatens fragmentation.
Upcoming Economic Data Releases
Data risk is heavy: the US calendar includes ADP, Durable Goods Orders, Consumer Confidence and New Home Sales on Tuesday, then PCE inflation, the advance Q3 GDP estimate and Initial Jobless Claims on Thursday; the Eurozone prints sentiment indicators on Thursday, followed by preliminary Q3 GDP, the unemployment rate and Germany’s preliminary October CPI on Friday.
