Euro gathers strength to near 1.1250 on Democrat win, hot Eurozone inflation

The EUR/USD currency pair climbed to a near 1.1245 mark on Thursday, as the US Dollar retreated against the Euro following the Democrats' victory in the US midterm elections. Germany's Factory Orders for September were anticipated later that day. The Democrats secured a majority in both the Senate and House of Representatives for the first time in decades, marking a significant defeat for President Donald Trump.

Analyst Carol Kong from Commonwealth Bank of Australia stated that a Democratic sweep could weaken the US dollar, potentially benefiting the Euro. The Harmonized Index of Consumer Prices (HICP) in the Eurozone surged to 4.0% in October, marking its highest level in three years, signaling strong inflation. This came after a 3.8% increase in September, aligning with market expectations.

The European Central Bank (ECB) maintained its key interest rate at 2.5% following a 25 basis point hike in September. Market expectations of a December rate hike from the ECB rose to 72.0%, up from 71.8% before the inflation data release. ECB officials conveyed a more hawkish stance, suggesting that policy tightening might be necessary in December to curb inflation, which has reached 4.0% year-over-year.

This hawkish commentary, coupled with concerns over energy shocks, is expected to bolster the Euro. Technical analysis indicates that EUR/USD is currently below its 100-day Simple Moving Average, indicating a medium-term bearish trend. However, the pair is trading slightly above the upper Bollinger Band and above the 20-day Simple Moving Average, suggesting potential short-term recovery.