Euro advances on ECB rate hike expectations, weaker US Dollar
EUR/USD gains ground after two days of losses, trading around 1.1150 during Asian hours on Monday.
The Euro (EUR) has gained strength against the US Dollar (USD) as European Central Bank (ECB) policymakers, including Germany and Italy's central bank heads, indicated a potential December interest rate hike. Eurozone inflation reached a three-year high of 4% in October, largely due to surging energy costs, supporting the likelihood of further monetary tightening.
ECB President Christine Lagarde emphasized the central bank's active monitoring of incoming data to determine whether a rate increase is necessary next month. Meanwhile, the USD has weakened, despite the likelihood of a 25-basis-point rate hike at the upcoming Federal Open Market Committee (FOMC) meeting, as suggested by the CME FedWatch tool.
Strong US jobs data, such as the recent rise in Nonfarm Payrolls to 165,000 in October, could potentially boost the Greenback and act as a headwind for the EUR/USD pair. Investors will be closely monitoring the upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) reports to gauge further Federal Reserve policy decisions.
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