Euro returns to its October low as ECB looms

• EUR/USD rebounds from its 14 October low, ending five consecutive sessions of losses.
• A 10-2 vote left Fed rates unchanged, with Fed Governor Cook favouring a hike in her first dissent.
• Third-quarter euro area GDP growth is forecast to ease to 0.2%, with the release due on Friday.

With the European Central Bank (ECB) due to announce its decision on Thursday, EUR/USD has recovered to around 1.1150 and is heading for its first advance in six sessions. The pair remains only a little above the low reached on both 14 October and Wednesday. The latest test of that level, just above 1.1100, came after five consecutive sessions of losses.

A 10-2 vote kept Fed rates unchanged. Cleveland Fed President Hammack and Fed Governor Cook backed a quarter-point increase, marking Cook's first dissent since she joined in 2022. In its statement, the Fed described US growth as strong rather than solid. Traders subsequently increased the implied probability of a December Fed hike from 75% to about 81%, affecting the US side of the interest rate differential in EUR/USD.

During his press conference, Fed Chair Warsh said he does not believe in forward guidance except in a crisis. He also noted that market-determined interest rates, which drive trading in the Dollar, have moved lower. EUR/USD reached its session peak during his remarks. Despite two votes for a rate rise and a stronger assessment of US growth, the pair is posting its only gain in six sessions.

ECB Decision and GDP Releases Set the Agenda

A deposit rate of 2.5% is forecast to remain in place when the ECB announces its decision on Thursday at 13:15 GMT, determining the euro side of the pair's interest rate differential. Questions to ECB President Lagarde follow at 13:45 GMT. On Friday at 10:00 GMT, the third-quarter euro area growth release is expected to show an increase of 0.2%, down from 0.6%.

An annualised growth rate of 3.2%, up from 2.2%, is forecast for third-quarter US Gross Domestic Product (GDP), due on Thursday at 12:30 GMT shortly before the ECB announcement. The projections therefore point to faster US growth and a euro area slowdown over the same quarter.

EUR/USD Remains Below Its Key Moving Averages

Since early October, a range with an upper boundary just above 1.1250 has contained EUR/USD, extending the retreat from August's high just above 1.1700. The pair has remained below its 50-day Exponential Moving Average (EMA) since mid-September. That average now sits just under 1.1350, while the 200-day EMA stands just below 1.1500.

Daily EUR/USD Price Chart