FX.co ★ Euro Strengthens as Weak US Data Fuels Fed Rate Cut Bets

On Tuesday, the euro surged to its highest level since November 18, approaching $1.16. This rise occurred as investors moved away from the dollar due to disappointing US economic data. Specifically, US retail sales revealed a smaller increase than anticipated in September, and ADP data indicated a worsening job loss situation over the four weeks leading up to November 8. Additionally, producer price inflation matched expectations with a 0.3% month-over-month rise. These lukewarm economic indicators, along with dovish remarks from several Federal Reserve officials, bolstered the outlook that the Fed will likely implement its third interest rate reduction of the year in December. In contrast, the European Central Bank (ECB) is projected to maintain current interest rates through 2026, supported by a solid economy and inflation levels close to target. ECB policymakers have expressed confidence, describing the central bank's position as satisfactory. Nonetheless, they acknowledge ongoing challenges such as elevated inflation in groceries and services, with member Joachim Nagel underscoring the need for continued alertness.