Euro extends its reversal as rising Oil prices offset upbeat German data

The Euro (EUR) experienced a decline against the US Dollar (USD) on Wednesday, erasing Tuesday's gains. This downturn was attributed to a rise in Oil prices and a strong US Dollar, ahead of the Federal Reserve's (Fed) minutes release. The EUR/USD pair traded near 1.1225, down from its highs on Tuesday at 1.1275, regardless of the positive German Industrial Production data.

German factory output grew by 2% in September, reversing the 1.2% decline in August and surpassing forecasts of a 0.5% increase. Year-over-year, Industrial Production rose by 2.3%, following a 1.6% contraction in the previous month. Despite these figures, markets maintained a risk-averse stance due to Middle East tensions, pushing Brent Oil prices above $100 per barrel, which could impact the Eurozone's economic growth.

The Euro gained some respite on Tuesday following far-right candidate Marine Le Pen's announcement of a plan to cut spending by EUR 140 billion in the next five years, aiming to reduce the fiscal deficit to below 3% by 2030. Meanwhile, the US Dollar is regaining its strength against peers as investors anticipate the release of the Fed's meeting minutes later in the day.

The Fed has raised rates by 25 basis points for the first time in three years and hinted at further tightening. US inflation and labor figures have led investors to lower their hopes for another rate hike in October. The overall US economy remains robust, with inflation staying above the Fed's target, keeping future rate hikes on the table until December 2026 and potentially more in 2027.