Euro set for third weekly decline as hawkish Federal Reserve outlook weighs
EUR/USD edges higher on Friday as the US Dollar (USD) pauses after a strong weekly rally, allowing the Euro (EUR) to recover some ground. However, the pair remains on track for a third consecutive weekly decline.
The Euro (EUR) faces a third week of decline amid hawkish Federal Reserve (Fed) outlook, as US Dollar (USD) rallies. On Friday, EUR/USD climbs to around 1.1400, after falling to its lowest since July 28, 1.1359, on Thursday. The USD rally stems from expectations of additional Fed interest rate hikes to curb inflation at 2%. US Dollar Index (DXY) reaches 101, its highest in nearly two months, with 10-year US Treasury yield near 5.22%, reminiscent of 2007 levels.
On Friday, US data highlights mixed signals, with Consumer Sentiment Index rising to 48.1 and Expectations Index at 46.3, both beating forecasts. However, inflation expectations stay unchanged at 4.6% for 1-year and 3.4% for 5-year measures. Traders now await upcoming PCE inflation report, ISM Manufacturing PMI, and NFP report to gauge Fed's October meeting expectations, with CME FedWatch Tool indicating a 66% chance of a rate hike.
On the Eurozone front, ECB has raised rates twice this year, yet there is no consensus on a predetermined policy path and they stress a meeting-by-meeting approach, acknowledging that higher oil prices have yet to trigger substantial second-round inflation effects.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
